Although it is a subject that many of us do not want to talk about, it is necessary to plan everything for our eventual death. In our life and current, litigious legal climate, it is of utmost importance that we have our estate sorted out before we go. We must make decisions that help our relatives and loved ones have everything in order. Our job is to make it easy for them while we can, so that they can focus on what matters when we can’t anymore.

Generally, we get to have assets, but quite often we do not know what will happen to them when we are gone. As legal professionals, we advise proper preparation so that these assets are easily transferred to the intended parties.

While you may have created a will or a testamentary trust, we would like you to keep in mind another viable option for those of you who already know how your assets will be distributed. This option is called “inheriting during life” and specifically refers to reserving the usufruct of the assets. In English, this is called a life estate.

Before going into this topic, it is necessary to understand the concept of usufruct and what it really includes.

The official definition of usufruct according to Miriam Webster is: “the legal right of using and enjoying the fruits or profits of something belonging to another”.

In Costa Rica, there is a legal concept called full ownership. The full dominion or full ownership consists of the ownership of the whole property.

To have full ownership of a property, it is necessary to have two elements:

1. Bare ownership: it is the right of a person (bare owner) to be the owner of an asset with the limitation of not being able to enjoy it.
2. Usufruct: is the right of use and enjoyment of a person (usufructuary) over the property that belongs to the bare owner.

The bare ownership and the usufruct are different rights, although they apply to the same property. Some differences are:

• The bare owner is the owner, but does not have the right of use and enjoyment.
• The usufructuary has the right of use and enjoyment, but not the ownership.
• The bare owner will only be able to enjoy the property when the usufruct ends (death of the usufructuary, generally).
• The usufructuary will be able to enjoy the house while his right lasts.
• The bare owner cannot rent the dwelling but can sell the bare property to a third party.
• The usufructuary can rent the dwelling and obtain income from that rent He can also sell the usufruct to a third party.

Thus, the full ownership will be when the usufruct and the bare ownership are with one party.

The right of usufruct is regulated in the Civil Code, which establishes that: under the right to usufruct things, all the natural, industrial, or civil fruits that they produce ordinarily or extraordinarily, belong to the owner.

Natural fruits are those spontaneously produced by the land, and the products and offspring of animals. On the other hand, industrial fruits are those obtained by work or cultivation. And finally, the civil fruits are the interest of money, the rental of things, and the price of the lease of farms, buildings, or any other real estate.

Once we understand these concepts, we see that in case we dispose of our assets before our death, we can reserve the usufruct (use and enjoyment of the property) while giving the intended parties, the bare property.

For example, if we have land with a house on it, the person can donate the bare property to the heir, but reserve the usufruct. This is with the intention of being able to continue living in the house and being able to enjoy it, without the heir being able to act against it. At the time of the death of the person, the heir may make a request before a Notary Public to the National Registry to make the change and become the full owner.

Generally, inheritances in life are given using donations, where the owner and the heir appear before a Notary Public. In such a transaction (called deed in Costa Rica), the owner donates to the heir the bare property and he or she reserves the usufruct. The Notary Public registers this deed before the National Registry and in this way, the property is inherited in life.

However, inheriting in life can also be done by purchase and sale, exchange, and any other title transferring ownership of a property.

Some benefits of inheriting during life are:

1. Helping loved ones in case of need

2. Avoiding uncomfortable discussions when it comes to distributing your assets

3. Immediate effect

4. Reversible action, if necessary

5. Less legal formalities

As you can see, inheriting during life is a great solution that has become quite common and requested by many. Besides, it avoids family conflicts, and expensive, long legal processes during probate. It also protects the owner until the day of his or her death.

Also it is our legal recommendation that even though you already have a will in another country o a testamentary trust, it is better to do a Costa Rican will, trust or inheriting during life, because the process of making that foreigner document valid in Costa Rica is a long and expensive one, so it’s better to dispose your assets with a Costa Rican will, testamentary trust or the other great alternative that is inheriting during life.

The Outlier Legal Business Team is well versed in living inheritances. If you are interested in the process of inheritance during life and require legal advice on the matter, please do not hesitate to reach out to us.