Tacit Consent vs. Article 918: Share Transfer with Usufruct

Are you a property owner in Nanterre and wish to pass on your assets to your children? Perhaps you have considered transferring shares in your property company (SCI) to them while retaining the usufruct (the right to use the property and receive its income).

This transaction, standard in property law, may nevertheless conceal a tax and inheritance trap. Article 918 of the Civil Code provides that certain transfers of company shares with a reserved usufruct are presumed to be disguised gifts, subject to clawback (reintegration into the estate to be divided) and reduction for infringement of the reserved share (the minimum portion guaranteed to heirs).

But all is not lost: the Court of Cassation's judgment of 26 January 2022 (No. 20-14.155) shows that the tacit consent of the protected heirs can defeat this presumption. Analysis.

The Facts: A Story Like Any Other

Mr. [E] [H], owner of a property company in Rueil-Malmaison, wished to organise his succession during his lifetime. On 14 July 2008, he transferred the bare ownership of shares to each of his four children, while reserving the usufruct for himself. These four transfers were strictly identical in form and almost simultaneous: carried out on the same day, by deeds of the same nature.

Upon his death in 2012, two of his children challenged these transactions before the Nanterre High Court (tribunal de grande instance). They argued that the transfers should be reclassified as disguised gifts, because Article 918 of the Civil Code treats transfers of company shares with a reserved usufruct as gifts if the transferor dies within three years. They therefore sought clawback of the transferred assets, which would increase the estate to be divided and potentially reduce the shares of the other heirs.

The Versailles Court of Appeal, in a judgment of 5 December 2019, dismissed their claim. It held that the strictly identical and almost simultaneous nature of the transfers demonstrated that they pursued an overall transmission objective, known and accepted by all the protected heirs. The judges thus inferred that the children had individually consented to all the alienations, which excluded the application of Article 918. The challengers appealed to the Court of Cassation.

The Reasoning of the Court — Analysed

The Court of Cassation had to decide a crucial question: can the tacit consent of the protected heirs prevent the application of Article 918 of the Civil Code?

Article 918 provides that when the deceased has transferred company shares with a reserved usufruct to a presumptive heir (child or descendant), this transfer is presumed to be a disguised gift. In other words, the law considers that, unless proven otherwise, it is a gift that must be brought into the estate to verify that the reserved share (the minimum portion guaranteed to heirs) has not been infringed.

But the Court of Cassation upheld the Court of Appeal's reasoning: if all the protected heirs have consented to the transaction, they cannot later invoke the presumption under Article 918. Indeed, the purpose of this provision is to protect heirs against transfers that could reduce their reserved share. However, if the heirs have consented, this protection is no longer necessary.

The judges noted several indicators: the transfers were identical, simultaneous, and pursued an overall transmission objective. This showed that the children had been informed and had accepted the arrangement. The Court of Appeal had discretion to assess these elements, which the Court of Cassation cannot overturn (it only reviews the correct application of law, not the facts).

This decision confirms a jurisprudential trend: the consent of the heirs, even tacit, can exclude the presumption under Article 918. But caution: the consent must be certain and unequivocal.

What This Means for You — Practically

If you are a property owner considering transferring company shares with a reserved usufruct to your children, this decision offers you additional legal certainty, provided you obtain their consent.

Let us take a numerical example: Ms. D., a property owner in Nanterre, is a shareholder in a property company holding an investment property valued at €600,000. She wishes to transfer the bare ownership of her shares to her three children, while retaining the usufruct (right to rent). If the children give their explicit or tacit consent (for example, by signing the deeds or not contesting for years), they cannot, after her death, request reclassification as a gift and clawback. This avoids costly litigation and preserves the deceased's wishes.

For heirs, this decision means you must be vigilant: if you accept a transfer with usufruct, you waive the right to challenge it later. It is therefore crucial to fully understand the consequences before giving your consent.

For professionals (notaries, lawyers, wealth management advisors), this case law reminds of the importance of formalising the consent of protected heirs, for example in the transfer deed or a separate document.

Four Tips to Avoid This Type of Dispute

• Obtain written and explicit consent from all protected heirs: a simple email or signed letter may suffice. This avoids any later dispute about the existence of consent.
• Consult a specialised notary or lawyer to draft the transfer deed. A professional can advise on the best strategy and ensure that the heirs' consent is properly formalised.
• Avoid transfers too close to death: even with consent, Article 918 applies if the transferor dies within three years. If you are in poor health, it is better to wait or opt for a standard gift.
• Document the transmission objective: in a letter or deed, explain why you are making these transfers (for example: "to prepare my succession and avoid high transfer taxes"). This strengthens the evidence of an overall agreement.

Further Reading: Related Case Law and Developments

This judgment is part of a line of decisions favourable to freedom of transmission, but one should not conclude that Article 918 has become a dead letter. In a judgment of 13 February 2019 (No. 17-31.587), the Court of Cassation had already held that the consent of protected heirs could exclude the application of Article 918, but only if that consent was "certain and unequivocal". The 2022 judgment clarifies that this consent may be tacit, resulting in particular from the simultaneity and identity of the transfers.

Conversely, if a single heir contests, or if the transfers are not simultaneous, the presumption applies fully. For example, a transfer to one child a year after another could be challenged by the child who was not consulted.

The trend is therefore towards some flexibility, but the lower courts retain significant discretion. In the future, courts may require tangible evidence of consent (written, absence of challenge for a reasonable period).

In Practice: What to Do

FAQ:

1. Can I transfer shares with usufruct without my children's consent?
Yes, but you risk them challenging it after your death. Article 918 would then apply, and the transfer would be reclassified as a gift, with clawback.

2. How can I prove tacit consent?
By showing that the heirs were aware of the transfers and did not challenge them for several years. For example, if they signed the deeds or participated in the management of the company after the transfer.

3. What are the time limits for challenging?
The action for reduction for infringement of the reserved share is time-barred after five years from death. The action for clawback is available as long as the estate has not been distributed.

4. Is oral consent sufficient?
In theory yes, but it is very difficult to prove. Written consent is better.

5. Does this decision also apply to gifts with usufruct?
No, Article 918 specifically targets transfers of company shares. For direct gifts, other rules apply.

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