In order to transfer the death benefit from life insurance, it is important to draft the beneficiary clause correctly.
This allows the subscriber to decide who will receive the death benefits. It is actually used to determine the conditions for payment of the amounts to the contract beneficiaries. And in the absence of it, or if the wording is poorly worded, the capital falls back into the insured’s estate. The capital will therefore not be covered by the life insurance tax scheme, but by the inheritance law. In many cases, this will be far less favorable for the beneficiary, especially if it is a cohabitant, a “distant” relative in the eyes of the tax authorities or unrelated to the insured.
Here are five tips to avoid the inconveniences associated with the incorrect definition of the recipient clause:
1. Adapt your recipient clause
Since the designation of beneficiaries applies at the time of settlement of the contract, it is important to adapt its beneficiary clause throughout the life of the contract so that the death benefits are received by the appropriate beneficiaries. It will be a matter of pinpointing who are the beneficiaries, of defining the rank of each individual beneficiary, and finally of determining the distribution of the capital between several beneficiaries, of anticipating what happens in the event of , that a beneficiary and payment methods.
2. The split recipient clause
You may decide to give 20% of the death benefit to one beneficiary and 80% to another, depending on the needs of your beneficiaries. If the death benefit is large, and depending on your personal situation, it may be appropriate to use a shared beneficiary clause in certain cases. Generally, the right of use of the death capital is attributed to the surviving spouse, as the children collect the bare property right. A notary can advise you to use this type of arrangement.
3. Refine the option clause
In general, this type of clause stipulates that the spouse, as the primary beneficiary, is responsible for choosing the distribution of the assets between himself and his children according to the distribution proposals that you want to have made. It will therefore be a matter for the subscriber to ensure the clause is correct by showing exactly the possible shares, according to the recipient’s choice, expressed as a percentage, as well as the allocated period to exercise the option right.
4. Use a notary public
A notary can help you draft the beneficiary clause. Using a notary makes it easier to administer the beneficiary clause in the case of several contracts, as the various beneficiary clauses are thus centralized in one place.
5. Ensure that sensitive points are respected
For the Beneficiary Clause to be considered valid, the subscriber must monitor several points, such as its full capacity at the time of writing the Beneficiary Clause. Moreover, the bonuses should not be considered grossly exaggerated. This point is sensitive in the case of the policyholder’s wish to benefit a person who is not part of his family circle.
