Nowadays, with the increase in life expectancy and the decrease in retirement pensions, many seniors are looking for alternative solutions to supplement their income and maintain their standard of living. One of these options is viager, which allows seniors to sell their property while continuing to live in it or receive a lifetime annuity. In this article, we will explore the different forms of viager (secured viager, free viager, and occupied viager) as well as their advantages and disadvantages for seniors.
Understanding the different types of viager
In order to choose the best viager option based on their situation, it is essential to understand the different forms this real estate sale can take:
Secured Viager
Secured viager is a type of occupied viager where the seller (also known as the creditor) continues to live in the property until their death. In return, the buyer (also known as the debtor) pays them a lifetime annuity and commits to paying the co-ownership charges and major maintenance work on the property. The amount of the annuity depends on factors such as the value of the property, the age of the creditor, and the interest rate set at the time of sale. This formula guarantees protection in the event of the creditor's death and allows the senior to stay in their home while ensuring greater independence.
Free Viager
In the case of free viager, the seller no longer occupies the property being sold, and the buyer can use it as they wish (live in it or rent it out). This formula is rather rare, as it implies that the creditor has another place to live. However, it has the advantage of often receiving a higher annuity than in an occupied viager, thanks to the sale of the property in free or occupied viager.
Property Dismemberment
This is a variant of viager where the creditor retains only the right of usufruct over the property being sold in viager. This means that they can continue to use it and collect its income, but they cannot transfer full ownership to their heirs. The debtor, on the other hand, acquires the bare ownership of the property, which means they have the right to become full owner at the end of the usufruct (usually at the creditor's death).
The advantages of viager for seniors
Viager offers several advantages to seniors who are looking for a viable solution to supplement their retirement:
A regular and guaranteed income supplement
The main advantage of viager is that it allows seniors to receive a retirement supplement in the form of lifetime annuities, the amount of which is set at the time of sale. This annuity can be indexed to inflation to ensure constant purchasing power. Furthermore, since the annuity is paid by the buyer, it is not subject to fluctuations in financial markets and therefore represents a secure investment in the face of insufficient retirement income.
Maintaining social ties and autonomy
By opting for an occupied viager or property dismemberment, seniors can continue to live in their home and thus maintain their familiar surroundings, family, and friends. This promotes the maintenance of autonomy and social ties, two key elements in preventing dependence in seniors.
The disadvantages and limitations of viager for seniors
Although viager offers many advantages, it is also important to consider certain disadvantages:
The difficulty of finding a buyer
Finding a buyer for a viager can be more challenging than for a traditional sale, as it generally involves a long-term investment for the debtor. Therefore, it may be necessary to seek the assistance of professionals specialized in viager sales to facilitate this process.
The risk of not receiving a sufficient retirement supplement
While the amount of the annuity paid is set at the time of sale, there is no guarantee that it will correspond to the senior's actual need for a retirement supplement. Furthermore, if the creditor dies prematurely, the buyer of the senior's viager can take possession of the property without having paid the full annuity agreed upon.
Reverse mortgage: an alternative to traditional viager
For seniors who do not wish to sell their property in viager but need a supplementary income to finance their retirement, there is the option of a reverse mortgage. This solution involves taking out a loan from a bank or credit institution, the amount of which will be repaid through the sale of the property after the senior's death. A reverse mortgage allows seniors to receive a lump sum or annuity without having to part with their home.
Seeking advice to choose the best viager solution
Since each situation is unique, it is crucial to gather information and compare different viager options before making a decision. A specialized advisor in this field can assist seniors in determining the best solution based on their personal, financial, and asset situation. They can also provide support in the administrative and legal procedures related to viager sales.