Bare ownership and inheritance: how it affects children

Key legal concepts: full ownership, usufruct and bare ownership

To analyse the inheritance implications of this transaction, it is helpful to recall how property rights are structured under Spanish civil law. Full ownership is divided into two distinct entitlements:

• Life usufruct: The right to enjoy, use and collect income or yields from an asset until the usufructuary's death.
• Bare ownership: The legal ownership of the asset, but stripped of the right to direct use and enjoyment for as long as the usufructuary retains their right.

When a homeowner sells the bare ownership and retains a life usufruct, they no longer hold full ownership. From that moment onwards, the seller retains an unwaivable right to live in the property for life or to rent it out if they see fit, while the buyer holds title to the property pending the termination of the usufruct.

Effects of selling bare ownership on children's inheritance

The central point that raises questions for families is determining what happens to the property when the parents pass away. When evaluating the link between bare ownership and inheritance, the primary legal consequence is straightforward: property transferred during a person's lifetime no longer forms part of the deceased's estate.

Upon the death of the usufructuary, what is known as the consolidation of ownership takes place. The buyer of the bare ownership automatically becomes the full owner of the property. Since the usufruct naturally terminates with the holder's death, the inheriting children do not acquire the home, nor do they need to include it in the inventory of the probate proceedings or the public deed of acceptance of inheritance.

Replacing property assets with liquid wealth

The fact that the property is not part of the estate does not imply a direct detriment to compulsory heirs, but rather a shift in the nature of the family's assets. By selling the bare ownership, parents transform an illiquid asset (the home) into immediate liquidity, received as a lump sum or through a periodic income stream.

This liquid capital becomes part of the parents' bank accounts or general estate. If, at the date of death, part of that capital remains unspent and available, it will form part of the estate to be distributed among the children and other heirs in accordance with the law or the provisions of the will.

Children's statutory share versus lifetime decisions by parents

Under Spanish law, the Civil Code establishes the principle of the statutory reserved share (legítima), a portion of the estate that the testator cannot freely dispose of because the law reserves it for specific beneficiaries known as compulsory heirs (primarily children and descendants).

Despite the existence of the statutory share, individuals with full legal capacity are entirely free to manage, encumber or dispose of their assets for valuable consideration during their lifetime. Selling bare ownership is an act of asset disposal in exchange for a market price calculated in accordance with usufruct valuation tables. Consequently, it is not considered a disguised gift or an unlawful reduction of the future estate, provided the transaction is conducted at market rates and for genuine consideration.

If the transaction were a sham without actual financial consideration, heirs could take legal action to rescind the deal on grounds of simulation. For this reason, it is essential that the transaction is properly formalised in a public deed before a notary, documenting the payment methods and the genuine value assigned to both the usufruct and the bare ownership.

Taxation and settlement of duties for heirs

From a tax perspective, the existence of bare ownership simplifies certain procedures in the subsequent management of the estate by descendants, reducing the administrative burden on the property:

1. Exemption from the taxable estate: Since the property is not transferred mortis causa, heirs do not have to pay Inheritance and Gift Tax (ISD) on that dwelling.
2. Personal Income Tax (IRPF): Parents over the age of 65 who transfer the bare ownership of their main residence enjoy full tax exemption on the capital gains generated from the sale.
3. Municipal capital gains tax (IIVTNU): The consolidation of ownership upon the death of the usufructuary must be settled by the buyer holding the bare ownership, leaving the heirs free of any obligation regarding this tax for the sold home.

Children will only need to settle taxes on assets actually appearing in the inventory at the time of death, such as bank deposits, financial assets or any other real or personal property that was not previously transferred.

Preventing joint-ownership issues and family disputes

Inheriting a family home often creates complex situations when there are several siblings. Co-ownership (proindiviso) of a single property requires agreement from all parties to sell, let or divide it, which can lead to disputes and shared maintenance expenses.

Arranging the sale of bare ownership during the parents' lifetime prevents joint property ownership issues after their passing. Any remaining estate will be largely liquid, making it significantly easier to divide according to the exact shares set out in the will, avoiding family litigation over property valuations or deferred sales.

Considerations for protected housing in the Comunidad de Madrid

In the case of properties subject to public protection schemes located in the Comunidad de Madrid, transferring bare ownership requires prior verification of the property's administrative status. It is necessary to check whether the official protection (VPO) regime's statutory period has expired or if the corresponding disqualification (descalificación) or administrative authorisation must be processed through the competent regional ministry before executing the public deed, observing any maximum sales prices established by regional Madrid regulations.

Legal certainty and rigour in estate structuring

To ensure that the sale of bare ownership aligns perfectly with the owners' financial goals and strictly respects the rights of all parties, flawless legal structuring is vital. Properly valuing the life usufruct (following the rule of 89 under Spanish tax rules) and explicitly defining maintenance obligations between usufructuary and bare owner are essential to avoiding future friction.

The legal team at Sky Law was recognised at the European Legal Awards in 2023, 2024 and 2025 for its specialized work in resolving complex transactions in property law. Furthermore, the estate agency and financial management processes associated with these transactions are conducted with the highest regulatory guarantees, with the firm registered on Banco de España's register of mortgage credit intermediaries under code ICI D-286.

To analyse the family implications for your estate, evaluate the legal impact on your inheritance, or arrange a formal valuation of your property, we invite you to get in touch with our expert team and discover more about our specialised bare ownership sales service.