Life annuity is of interest to more and more owners who want to stay at home while by improving their daily lives financially. “The idea is simple: fill a fridge, finance your addiction, adapt your accommodation to your needs, while remaining in your home »summarizes Brigitte Courgeon, life insurance specialist and founder of Célestina Formations in Nantes. Because, when your retirement is not very high, it can become difficult to finance your daily life.
She cites in particular the case of single women, aged 75 or 80, who have worked little or not and who live with reversion of their husband. “They still have the chance to be owners. The life annuity allows them to live in their home for as long as they want or can.”observes the specialist in the field. Especially since, when you absolutely want to keep your house but it has one floor, you have to finance a stair lift. With a little retreatthis can quickly become out of budget.
How does a life annuity sale work?
Concretely, the life annuity sale works as follows: the owner (the annuitant) transfers his property to a buyer (the debtor), who pays him in exchange a monthly pension until his death (and usually an initial capital called bouquet). Everything is governed by articles 1968 and following of the Civil Code. The starting point for the sale is an estimate of the property at its fair market value. “If the property is underestimated, the entire basis of calculation is distorted, and the annuity will be too low”insists Brigitte Courgeon.
The buyer can take possession of the accommodation immediately (free life annuity) or only upon the death of the seller (occupied life annuity), the most common formula. In this case, the market value is then reduced by a discountcalled DUH (right of use and habitation), which represents the value of the seller’s remaining years of occupation. For a 78-year-old seller, this discount is commonly between 35 and 45% of the value of the property. Once the occupied value is obtained, we subtract the bouquetif there is one. “The bouquet is not obligatory, but it is recommended according to the needs of the person »explains Brigitte Courgeon. In the event of a financial emergency, for example a debt to the trustee, the bouquet can be calibrated exactly to mop it up.
The Daubry scale is then applied to the remaining balance, an actuarial table which takes into account the age and sex of the seller to calculate an annuity rate. The formula is as follows: (market value – DUH – bouquet) x annuity rate / 12 = monthly annuity. This scale is not imposed by law, but is imposed in practice: “All the notaries in France and all the life annuitants work with him”confirms Brigitte Courgeon.
Indexation, taxation and guarantees: know before signing
The annuity is not fixed. Each year, on the anniversary of the notarial deed, it is re-indexed according to an index chosen at signature, often the consumer price index excluding tobacco or that of rents. The annuity can therefore increase or decrease depending on variations in this index. “If the person leaves their home permanently (for an nursing home or to live with a relative), an additional increase applies as compensation : it releases the keys to the property, the buyer has access to them, and this results in a revaluation of the rent”specifies Brigitte Courgeon.
Before signing, Brigitte Courgeon also emphasizes a point that can be overlooked by sellers: “The creditworthiness of the buyer is essential. The annuity must be paid until the end of life, even in 25 years. If the buyer can no longer pay, the seller is in difficulty. » Finally, the taxation of life annuities is particularly advantageous depending on age.
