Some life insurance subscribers use this product to pass on assets to their heirs. The tax benefits associated with this are indeed attractive to the designated beneficiaries. Note, however, that the taxation is not the same for payments made before and after 70 years. It is therefore appropriate to take this difference into account when the insured approaches their 70th birthday.
A limited tax exemption for premiums paid after age 70
ImportantIf the insured supplements his contract after reaching the age of 70, the beneficiaries will only be entitled to a joint reduction of 30,500 euros. In addition, the excess amount will be subject to inheritance tax (45% for direct heirs and 60% for beneficiaries unrelated to the deceased).
However, accrued interest on paid-in premiums will not be subject to income tax.
On the other hand, for contributions paid just before this age, each of the persons named in the beneficiary clause will be able to benefit from a tax exemption of up to 152,500 euros. Beyond this threshold, the rate applied is 20% up to 700,000 euros, and for the part of the saving that exceeds this amount, 31.25%.
As a reminder, the subscriber can on a life insurance are free to change the share of each recipient at any time if they wish.
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It is not recommended to wait until the last minute
Some people make the mistake of waiting until the last minute to contribute a fairly large amount of capital to their savings. However, the processing of the request sometimes takes a few days, especially if the payment is made by check or a transfer involving two banking institutions.
With this deadline, it is very possible that the operation will not be carried out until after the date of one’s 70th birthday, in which case the reduction is not only limited, but the beneficiaries will have to pay inheritance tax. Concretely, this will not result in any tax loss for the subscriber, however the tax that must be paid will be heavier for the person or persons receiving the capital.
- The taxation of premiums paid on a life insurance contract before the age of 70 is more favorable to beneficiaries
- It is advisable not to wait until the last minute – a few days before your 70th birthday – to put a significant amount into your contract.
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