Life annuity without an annuity payment: how it works and what the advantages are

What is a life annuity without an annuity payment?

A life annuity without an annuity payment, also known as a bare ownership sale, is a type of life annuity sale in which sellers do not receive a life annuity in exchange for the sale of their real estate. When the property is sold, the ownership is separated: the ownership is divided between the bare ownership and the usufruct.

In a life annuity without an annuity payment, the seller sells the bare ownership of the property, and retains the usufruct (the right to live in the property or to rent it out). The seller therefore loses full ownership, but recovers the market value of the property in the form of a large lump sum payment.

As opposed to the classic life annuity, a life annuity sale without an annuity payment thus preserves the seller’s right to live in the property until his/her death or to rent it and to receive the entirety of the rents.

What are the advantages of a life annuity sale without an annuity payment (bare ownership sale)?

A life annuity sale with an annuity payment is an alternative that can be chosen by the seller when selling the property in order to receive a larger amount of capital (this capital can be up to six times higher than in a traditional life annuity sale). In the case of the sale of a primary residence, the capital is not taxable.

As opposed to the classic life annuity (unoccupied or occupied life annuity) in which the seller receives the payment of a taxable life annuity, in this case, the selling price is paid in a single payment at the time of the signing of the bare ownership deed of sale. Payment is immediate.

A life annuity sale without an annuity payment offers many advantages, including financial security for the seller, who can immediately use the sale amount to pay for expenses.

Who can benefit from a life annuity sale without an annuity payment?

A life annuity sale without an annuity payment (a bare ownership sale) is an ideal alternative for people who want to improve their standard of living without having to leave their property or give up their lifestyle. The seller receives a larger amount of capital than in a traditional life annuity, and is protected from the risk of unpaid annuities.

The advantages and disadvantages of a life annuity without an annuity payment

What are the advantages of a life annuity without an annuity payment?

In a life annuity without an annuity payment (that is, a bare ownership sale), sellers can use the capital funds as soon as the sale is made in order to finance their plans, or to get out of difficult financial situations. Sellers may also use the funds received from the sale to make a gift while they are still living. It also avoids the administrative steps involved in collecting the life annuity as part of a traditional life annuity (tax declarations, etc.). Finally, a life annuity without an annuity payment allows sellers to enjoy greater financial freedom for the years to come, to receive more capital, to receive rents from their property, and to enjoy life to the fullest.

The disadvantages of life annuity without an annuity payment

By receiving a capital sum in a single payment, the seller gives up the right to receive a life annuity each month. In return, the capital received can be up to six times the amount of the lump sum payment of a classic life annuity. It also avoids the risk of unpaid life annuities.

Classic life annuity vs
Life annuity without an annuity payment (bare ownership sale)

What is our opinion on life annuities without an annuity payment (bare ownership sales)?

For us, a life annuity without an annuity payment, also known as a bare ownership sale, is an advantageous solution for the following reasons:

• It is a fast and substantial cash flow, and is immediately available,
• The capital paid is non-taxable in the case of the sale of a principal residence,
• The seller can continue to live in the home (as in the case of an occupied life annuity), and can even rent it out to guarantee regular additional income – which is impossible in the case of a classic life annuity.

You can find more detailed information on this subject in our article: The five benefits of a bare ownership sale

Who pays the notary fees on a life annuity without an annuity payment?

When selling a life annuity without an annuity payment or a bare ownership, it is important to note that the buyer pays the notary fees.

The costs are generally calculated according to the bare ownership sale price, as well as the various legal acts required for the transaction.