Monaco Life Annuity: Complete Guide to Investing in Luxury Real Estate

Monaco is one of the most exclusive real estate markets in the world. With prices reaching record highs, the acquisition of a property in the Principality can be an obstacle course. However, a little-known solution allows you to invest in it in a more accessible and strategic way: the life annuity. A patrimonial and financial alternative, the life annuity offers buyers the opportunity to acquire a property at a discounted price, while guaranteeing sellers immediate capital and a secure income for life.

Contrary to popular belief, the life annuity in Monaco is not only a real estate tool, but a real asset management instrument, suitable for sellers wishing to take advantage of their capital without leaving their home as well as for investors looking for a long-term investment.

In this guide, Petrini Exclusive Real Estate Monaco, a specialist in luxury real estate, explains the mechanisms of the Monegasque life annuity, its advantages and how it can become a strategic lever in a wealth acquisition.

The life annuity is a real estate sale in which an owner (annuitant) transfers his property to a buyer (annuitant) in exchange for an initial payment (the bouquet), followed by a life annuity paid until the death of the seller. This transaction is based on the fundamental principle of contingency: as the duration of the payment of the annuity is uncertain, it is an essential element of the contract.

The Different Forms of Alternative Real Estate Sale in Monaco

The Monegasque real estate market, characterised by high prices and high demand, is pushing buyers and sellers to explore alternative solutions to traditional transactions. Apart from the occupied and free life annuity, bare ownership and forward sales represent interesting asset options, each with its own strategic advantages.

Occupied Life Annuity: Retaining the use of your property

The occupied life annuity is the most common form in Monaco. In this context, the seller, known as the annuitant, transfers his property while retaining a right of use and habitation (DUH) until his death. In concrete terms, this means that he continues to live in his home without owning it, while the buyer (annuitant) becomes the legal owner of the property, but will only be able to dispose of it after the death of the seller.

This form of life annuity has several advantages for the annuitant. On the one hand, he receives an initial bouquet, a sum paid in cash when the deed is signed, which allows him to immediately obtain cash to finance his lifestyle, carry out projects or pass on part of his assets to his heirs. Then, he receives a regular life annuity, which provides him with additional income for life, without having to worry about rental management or fluctuations in the real estate market.

For the buyer, the interest of the occupied life annuity lies in the discount applied to the price of the property. Indeed, the value of the right of use and habitation is subtracted from the market value, which makes it possible to acquire a prestigious property at a reduced price. However, the profitability of this investment is based on one element of uncertainty: the life expectancy of the seller. The longer the seller lives, the higher the accumulated annuity will be. Conversely, if the seller dies earlier than expected, the buyer can carry out a very financially advantageous transaction, by becoming the owner of a high-end property well below the world market prices Gasque.

In Monaco, where properties have an extremely high value, the occupied life annuity is a particularly popular solution for sellers wishing to remain in their usual living environment while freeing up capital. It is also interesting for buyers looking to invest in an ultra-premium real estate market at more attractive conditions than those of a traditional acquisition.

• The seller remains in his home with a right of use and habitation (DUH).

• The buyer benefits from a significant discount on the price, as the value of the right of use and habitation (DUH) is subtracted from the market value of the property.

• The seller receives an initial lump sum and a monthly annuity guaranteed for life.

• Ideal option for an owner wishing to monetize his property while living there until his death.

Free Life Annuity: Invest with immediate availability

The free life annuity is a different option that allows the buyer to immediately take possession of the property. Unlike the occupied life annuity, the seller does not retain his right of use and must leave the property as soon as the deed is signed. This type of life annuity works like a traditional transaction, but with a staggered payment in the form of a life annuity rather than a single purchase price.

This model is particularly suitable for sellers who no longer wish to live in the property or who prefer to obtain a larger amount immediately by renouncing their right of use. They may be homeowners who want to move elsewhere, residents planning an expatriation, or simply people looking for a more advantageous solution than the traditional sale.

For the buyer, the free life annuity has a double advantage. On the one hand, he can occupy the property from the moment of purchase, which is an asset for those looking to reside in the Principality immediately. On the other hand, he can rent out the property, thus generating regular income to compensate for the payment of the life annuity. This strategy can be particularly interesting in Monaco, where rental demand is strong and rental yields are among the most attractive in the luxury real estate market.

However, unlike the occupied life annuity, the purchase price of the free life annuity is higher, because there is no discount related to the deprivation of use. The annuity is also generally higher, since the buyer immediately benefits from the use of the property.

This type of life annuity is therefore an ideal option for buyers wishing to access a Monegasque property without delay, whether to reside there or to make it profitable by renting. It particularly appeals to customers looking for a smart investment solution, offering both a prestigious real estate acquisition and a staggered payment over time.

• The buyer takes possession of the property as soon as it is signed and can occupy or rent it immediately.

• Since there is no right of use and habitation (DUH), the purchase price is higher and the annuity is generally higher.

• Suitable for sellers who no longer wish to live in their property or prefer to maximize their capital immediately.

Bare Ownership: A Wealth Investment Without Rent

The sale of bare ownership is a form of dismemberment of ownership, in which the seller transfers the bare ownership of the property while retaining the usufruct, i.e. the right to live in it or to receive the rents. Unlike a life annuity, this transaction does not include an annuity: the seller receives the full sale price immediately, and the buyer becomes the full owner of the property at the end of the usufruct, without having to pay any additional compensation.

The financial evaluation of this operation is based on a usufruct scale, based on mortality tables such as the TGF05 (2005 Women's General Table) and the TGH05 (2005 Men's General Table). These tables make it possible to estimate the life expectancy of the seller and, consequently, the value of his usufruct. The older the seller, the more the value of the usufruct decreases and the more the share of the bare ownership in the overall price of the property increases.

For example, a 70-year-old seller retains a usufruct that still represents about 40% of the total value of the property, while at 85, his usufruct is only worth about 20%.

In concrete terms, this means that the buyer of a bare ownership of a property estimated at 10 million euros could acquire it for 6 million euros if the seller is 70 years old, or 8 million euros if the seller is 85 years old, with the assurance of automatically recovering full ownership in the long term, without additional costs or formalities.

Unlike the life annuity, where the buyer takes a financial risk depending on the longevity of the annuitant and the duration of the annuity payments, bare ownership offers immediate financial visibility. The buyer knows the exact amount invested from the moment of purchase, without depending on an uncertain payment period. This type of transaction is particularly popular with long-term wealth investors, who wish to acquire a property at a reduced price while securing their full ownership at a known maturity.

Forward Sale: A payment in instalments without life contingencies

The forward sale is an alternative to the life annuity for sellers who want a secure payment over a fixed period. Unlike the life annuity, where the annuity is paid for life and depends on the longevity of the seller, the forward sale provides for a schedule defined in advance.

The sale price is divided into:

1. An initial payment (bouquet) when the contract is signed.

2. Fixed monthly payments paid over a set period of time (e.g., 10, 15 or 20 years).

If the seller is still alive at the end of this period, he continues to enjoy his property if he has kept a DUH or a usufruct, but no longer receives payments. If the seller dies before the end of the term, the remaining payments can be passed on to his heirs, unlike the life annuity where the annuity expires on the death of the annuitant.

This solution is suitable for sellers who want to guarantee a fixed price while retaining a possible right of use. For the buyer, the forward sale offers clearer financial visibility than the life annuity and can avoid certain risks related to the uncertainty of the seller's longevity.

Summary of the Differences between these Four Formulas

✔️ Occupied Life Annuity: The seller remains in the property and receives a life annuity. The buyer benefits from a discount on the price.
✔️ Free Life Annuity: The buyer takes possession of the property immediately and pays an annuity to the seller.
✔️ Bare Ownership: The buyer acquires the property at a reduced price without rent, but the seller retains the usufruct.
✔️ Forward Sale: The buyer pays in several instalments over a fixed period, without any uncertainty related to the longevity of the seller.

The Legal and Tax Specificities of the Life Annuity in Monaco

The life annuity in Monaco is based on a rigorous legal framework and an attractive tax environment, which make it a particularly attractive option for wealthy investors and sellers from all over the world. Due to its status as a sovereign principality, Monaco applies rules that are different from those of neighbouring countries, with a strict notarial system and extremely advantageous taxation, with no income tax or property tax.

Any life annuity transaction in Monaco must be concluded before a notary, thus guaranteeing a maximum level of legal security. The Principality has three official notaries, who supervise all real estate sales and ensure that the contracts comply with the rules in force.

One of the fundamental principles of the life annuity is uncertainty: the outcome of the transaction must be uncertain at the time of signing. This means that the length of time for which the pension will be paid out must remain unpredictable. In the absence of a contingency – for example, if the seller is seriously ill and dies shortly after the sale – the deed can be annulled by the courts. This strict control prevents abuse and protects elderly sellers, in particular by ensuring that the transaction respects their personal situation.

In addition, life annuity contracts in Monaco may include specific clauses that protect both parties. Among them:

• An adjustment or cancellation clause in the event of the seller's rapid death, guaranteeing compensation for his heirs or a revision of the terms of sale.

• An indexation of the life annuity, which makes it possible to adjust payments to inflation or the Principality's economic indices, thus ensuring stable purchasing power for the annuitant.

• Tailor-made asset structuring, allowing the life annuity to be integrated into an inheritance or tax planning strategy.

In Monaco, where the longevity of residents is one of the highest in the world (around 89 years on average), these provisions make it possible to adapt contracts to the specific needs of annuitants while guaranteeing fairness for buyers.

A Tax System Advantageous for International Investors

One of the major attractions of the life annuity in Monaco lies in its exceptional tax environment, which is particularly advantageous for international investors. Unlike many jurisdictions where the purchase of real estate is accompanied by heavy taxes, the Principality offers a framework that is virtually tax-free:

• No taxation on the life annuity: A seller residing in Monaco receives his annuity in full, without tax withholding. This is a major asset for an annuitant looking for an additional source of income in the long term, without tax impact.

• Total absence of real estate wealth tax: Unlike major financial centres such as London, New York or Paris, Monaco does not impose a tax on the ownership of real estate. This means that the buyer of a Monegasque life annuity can secure a tangible prestige asset without annual tax cost.

• No property tax or housing tax: Unlike the United States, the United Kingdom or Switzerland, where the ownership of a property is accompanied by property taxes that can reach several tens of thousands of euros per year, Monaco does not apply any recurring taxation on real estate ownership.

Transmission and Inheritance: A Favourable Heritage Framework

The life annuity can also be part of a wealth transfer strategy, especially for wealthy families wishing to optimize their estate. The Principality applies an extremely lenient inheritance tax:

• 0% inheritance tax between parents and children, allowing a tax-free inheritance.

• Reduced rates for other heirs: Between brothers and sisters, or between uncles and nephews, inheritance tax is much lower than in Europe.

• A stable legal framework, which allows the wealthy to plan their succession with complete peace of mind.

Thus, for an investor looking to structure his wealth over several generations, acquiring a life annuity in Monaco allows him to optimize both his real estate investment and his estate strategy.

Reduced Acquisition Costs and Financial Structure of the Life Annuity

The purchase of a life annuity in Monaco is more attractive in terms of acquisition costs than a traditional transaction in other leading countries.

• Notary fees and registration fees are calculated on 6% of the purchase price, based on the occupied value of the property and the capitalization of the annuities over 10 years.

• This method reduces the taxable base, making the investment in a life annuity more accessible than the purchase of a freehold property immediately available.

• In comparison, in New York or London, acquisition costs can exceed 10% of the purchase price, with additional land management and maintenance costs.

For a buyer, investing in a life annuity in Monaco means acquiring a property in one of the most prestigious markets in the world with almost zero taxation and a perfectly secure legal framework.

Why does Monaco stand out for the Life Annuity?

On an international scale, Monaco stands out for several unique assets:

✔️ A privileged tax framework, without tax on income, wealth or inheritance in the direct line.
✔️ An exclusive real estate market, where the scarcity of properties guarantees continuous value.
✔️ Legal and political stability, attracting the world's wealthiest.
✔️ An absence of property or rental taxes, considerably reducing the cost of owning the property.

In this context, the life annuity in Monaco is much more than a simple real estate investment: it is an intelligent asset management tool, allowing you to optimise the management of your capital, anticipate its transfer and acquire a property in a market where demand far exceeds supply.

Our guides on the Life Annuity in Monaco and the Different Forms of Real Estate Assignment

The life annuity in Monaco is much more than just a real estate transaction. It is a strategic solution allowing sellers to monetize their wealth while maintaining their quality of life, and buyers to invest intelligently in an ultra-exclusive market, with exceptional tax and financial conditions. The absence of income tax, property tax and wealth tax, combined with a rigorous and secure legal framework, makes Monaco a unique destination for this type of investment.

At Petrini Exclusive Real Estate Monaco, we specialise in the sale and acquisition of life annuity and bare ownership properties. With our expertise and in-depth knowledge of the Monegasque market, we support sellers and investors at every stage of the process, ensuring optimised and secure transactions. Whether you want to sell your property as a life annuity or explore this investment opportunity, our team is at your disposal to advise you and guide you towards the best solution.

We have also designed a series of detailed articles and guides to delve deeper into each aspect of the life annuity in Monaco. These resources cover all the essential themes, including the occupied and free life annuity, forward sale, bare ownership and usufruct, as well as the tax and inheritance implications. You will also find precise analyses on the profitability of the life annuity, advice on how to secure your purchase and valuation tools to assess the value of a property in this particular context.

If you would like to know more or be supported in your project, do not hesitate to contact us. Our team puts its know-how at your service to offer you personalised support and help you get the most out of Monegasque real estate