If yousell your property to your child on condition that he or she pays a life annuity, the transaction will be reclassified as a gift. Article 918 of the Civil Code states that "the full value of the property disposed of, either on payment of a life annuity, or outright, or with reservation of usufruct to one of the successors in the direct line, is deducted from the available portion".
In this situation, there is therefore an irrefutable presumption of a gift outside the inheritance instead of a life annuity sale. No evidence to the contrary can be adduced to avoid this requalification.
We will specify here that this presumption concerns a life annuity sale to one's child or, more precisely, to a successor in the direct line, i.e. the presumptive heir on the date of the deed of alienation. The presumption applies in the case of a life annuity sale to a grandson if the grandson's father is deceased at the time of the sale. Conversely, if the grandson's father is still alive, the life annuity sale by the grandfather will not be irrefutably reclassified as a gift.
With this presumption of gift, the legislator wanted to avoid any risk of a gift disguised as a life annuity sale. In fact, depending on the donor's assets, it may be more attractive to pay transfer tax for consideration than transfer tax for free. If this is indeed the case, it will be in the interests of both parties for tax purposes to sell the property as a life annuity, without the vendor claiming payment of the life annuity or enjoying the usufruct. To avoid this, a life annuity sale to one's children will always be treated as a gift.
Furthermore, without this reclassification as a gift, it would be easy for the life annuity vendor to favour one child over another. It should be remembered that under current French law, it is not possible to exhort one's children (except to squander one's assets or in cases of indignity). Thus, by automatically reclassifying a life annuity sale to an heir in the direct line as a gift, the legislator is simplifying an action in reduction to reconstitute the reserves of the injured heirs.
The risk for the purchaser of a life annuity, if he or she is a direct successor to the seller, is that the value of the property transferred to him or her exceeds the available portion (the portion of the deceased's estate that is freely transferable), which would result in a reduction in the value of the presumed gift.
However, this irrebuttable presumption can be set aside. Case law holds that the presumption can be set aside when the life annuity sale is made to a company in which a reservataire heir is a partner.