The lifetime usufruct is calculated by subtracting the age of the usufructuary from 89, with a minimum of 10% and a maximum of 70% of the property's value. This distributes the tax burden between parents and children.
According to lamoraleja.com, in the large residences of La Moraleja, the separation of ownership into naked ownership and usufruct is used to reduce the tax burden on IRPF and Wealth Tax, as well as to organise the transfer to heirs.
Naked ownership retains the title of the property and the right to sell or encumber it, but does not grant the right to use it or collect its income. The usufruct allows one to inhabit the property or receive the rents it generates. Typically, according to the text, parents transfer the naked ownership to their children while reserving the lifetime usufruct, or they transfer a temporary usufruct to young children or family companies.
To calculate the base for the Inheritance and Donations Tax (ISD) and the Property Transfer Tax (ITP), the lifetime usufruct is obtained by subtracting the age of the usufructuary from 89, with a minimum of 10% and a maximum of 70% of the property's value. In the example from the text, a mansion valued at 5 million euros with a usufructuary aged 69 years has a usufruct of 20%, equivalent to 1 million euros, and the naked ownership accounts for the remaining 80%. The temporary usufruct is valued at 2% per year of duration, with the same cap of 70%, meaning ten years equate to 20%.
In the Community of Madrid, the donation of naked ownership or usufruct between parents and children (Group II of kinship) has a 99% discount on the ISD fee, which reduces the tax cost at the time of establishing it.
In the IRPF, the naked owner of an urban property that is not their habitual residence nor rented must impute an income of 1.1% or 2% of the cadastral value, according to Article 85 of the IRPF Law. By dismembering the ownership, the naked owner stops imputing that income, which passes to the usufructuary. If the usufructuary uses it as their habitual residence, it is exempt. If it is an adult child with low work income, they are taxed in the lower brackets of the rate, while the parents would fall into the higher brackets, which according to the text reach 47%.
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