The great freedom offered by life insurance contracts is also a positive point when it comes to constructing a beneficiary clause. We had already alerted you to the importance of its drafting. We now go further by examining the possibilities of dismemberment. A way to allocate capital differently and to several people, in order to protect some and help others later.
Behind the barbaric name of dismemberment of life insurance hides a somewhat complex mechanism for allocating the capital of its life insurance.
1. Dismember to better protect
The advantage of dismembering the beneficiary clause is be able to protect a loved one after his death, while then ensuring the transfer of his capital in the advantageous framework of life insurance.
An ideal way to provide capital to your surviving spouse, while ensuring that it will then be deducted from the latter's estate to be passed on to the beneficiary that you yourself designated in his contract, such as by example his children.
Concretely, in the family framework that we have cited, this means that the surviving spouse owes a debt to his children, which will be reimbursed at his death. The advantage is that the amount transmitted at that time is not subject to inheritance tax.
Indeed, the dismemberment makes it possible to designate a beneficiary usufructuary (technically, he is quasi-usufructuary) of his life insurance. He can therefore make use of the capital and receive the interest.
However, he is not fully owner of this capital, which he must return to the beneficiary in bare ownership, during his succession. The beneficiary then recovers what is called a “refund claim”.
2. Make sure your will is respected
Since you will no longer be there to verify the proper implementation of the dismemberment of your life insurance, take your precautions.
“So be careful when drafting the dismemberment of your beneficiary clause, by asking for example the help of your insurer.”
Better yet, neutralize the possible conflicts between the usufructuary and the bare owner (s). To do this, you can ask your future usufructuary to sign an acknowledgment of debt to the bare owners.
The best is then to register it with the tax collection. This will ensure its fair reimbursement at the time of the succession and will facilitate the possible steps of the bare owners.
3. A fiscally attractive solution
Upon the death of the life insurance holder, the usufructuary and the bare owner are both considered beneficiaries of life insurance. With the tax implications that this implies.
The 20% levy therefore applies to both, pro rata to the share of capital affected and the age of the subscriber on the day of his death.
Then, the reduction of € 152,500 from which the capital benefits before it is taxed is distributed between them, again in proportion to the amount each receives.
Be careful however, because taxes are due immediately. This means that children will have to pay the amount of their rights without having yet received the capital of life insurance. It is therefore appropriate to provide for this expense.
But the advantage is that children benefit from this tax allowances allowed by life insurance. Conversely, if the inheritance had been transmitted to the spouse and then bequeathed to the children, they would have had to pay higher inheritance taxes.
The dismemberment of a life insurance clause can thus benefit all members of a family, provided that the necessary precautions are taken, both for its drafting and for its implementation.