Often presented as the investment of choice for the French, life insurance is not highlighted as a wealth transfer solution. Still, it is one of the most effective envelopes.
Often described as an “old” and “dusty” product, life insurance is one of the most powerful tools for anticipating the transfer of one’s assets. The latter very often boils down to succession and gives rise to a lot of debate about taxation. must bear in mind that this type of problem can and must be organized upstream to optimize the organization and distribution of one’s inheritance as much as possible. Several tools are available to the individual, and they are not reserved only for experienced people. They are designed. for all situations.
In fact, a disorganized inheritance during his lifetime can have undesirable consequences. It is therefore strongly recommended to anticipate and organize during your lifetime to avoid conflicts between heirs, but also to reduce the associated taxation.
Often presented as “the French’s investment of choice”, life insurance is little promoted as a solution for transferring assets. However, it is one of the most efficient envelopes in terms of tax and assets to transfer: it allows you to benefit from a favorable legal and tax framework both during life and at the time of death.
1. Life insurance is not an estate
It is the insurance law that tells us. When signing a life insurance contract, a beneficiary clause is drawn up to designate the beneficiary of the capital in the event of death. And unlike other envelopes, this one does not include heirlooms and does not consider family ties. Anyone can be designated as the beneficiary of the life insurance contract and benefit from the favorable taxation of this envelope (except for obviously excessive premiums).
2. An advantageous tax framework
In addition to the legal benefits that life insurance offers, the taxation associated with death is all the more interesting. The available compensation, when the payments were made before the age of 70, is 152,500 euros per recipient, all contracts together, regardless of the family relationship, as specified in Article 990 I of the General Tax Code. Even in a classical succession, the reductions are not so important in the direct line. And above all, the rates are much lower than the maximum rate in inheritance law, which can reach 45% between parents and children.
3. A legacy and flexible envelope
We must no longer make the mistake of confusing life insurance with death insurance. Life insurance is above all an investment envelope where you can manage that money, make it grow and simply build capital to pass on to descendants.
In addition to life insurance, we can also mention donations during his lifetime, which allow him to allocate to his children / grandchildren or his relatives and benefit from the applicable reductions according to the relationship. Nevertheless, the donation implies a disposal of these amounts without having power over the given amount. There are, of course, exceptions that involve additional formalism, such as the supplementary covenant that will make it possible to regulate the terms of this donation: reinstatement clause, temporary non-alienation clause, third-party administrator, etc.
Unlike life insurance, which allows you to organize the transfer of your assets without disposing of this money yourself. Note, these two tools are therefore not to be opposed: they are meant to complement each other.
They can actually be completely combined. For example, a donation makes it possible to take advantage of the reductions associated with transfer taxes, which are renewed every 15 years, for free. It can be accompanied by an assistant covenant, which allows for re-employment in a life insurance contract in the name of his child (or grandchildren). This contract will make it possible to finance a future project and get tax priority.
Life insurance is therefore an envelope which is necessary and which must be favored when the question of one’s succession is asked. In addition to protection for children, grandchildren and loved ones or reduced taxation, life insurance can respond to more complex situations.
Some estates can be more complicated to understand because of the structure of the deceased’s assets (for example: a lot of real estate, little cash or financial assets). The descendants do not necessarily have the amount immediately available to pay the inheritance tax. Life insurance will also make it possible to anticipate these inheritance taxes that will be payable on these illiquid assets in the estate. The idea will be to designate the heirs to send them the necessary amount to pay their taxes, if possible the limit of the applicable reduction. Let’s not forget that the beneficiaries of a life insurance contract will not be taxed up to €152,500 each.
And we need to take this matter in hand as soon as possible, since this advantageous taxation only applies to payments made before the age of 70.
In conclusion, life insurance allows you to benefit from an advantageous and flexible framework for anticipating the transfer of your assets. This is one of the most effective options when you want to take charge of this subject, so don’t deprive yourself of this Swiss army knife!