According to the Insurance Code (article L. 132-12), a life insurance contract is an asset placed “outside the estate”.
This means that when the subscriber dies, the capital built up goes to the designated beneficiaries and not to the heirs.
LLife insurance benefits from a favorable estate plan since the capital transferred is exempt up to € 152,500 if the contributions have been paid before age 70.
Consult the Ooreka fact sheet
“Non-estate” life insurance
Life insurance is a contract guaranteeing the payment of capital (or an annuity) to a designated beneficiary. When death occurs, the capital transmitted does not enter into the calculation of the estate. The assets are not taken into account for the calculation of inheritance tax owed by the heirs (regardless of the designated beneficiaries).
Regarding these designated beneficiaries, two scenarios are possible: it is either the surviving spouse or a third party:
- if the beneficiary of the contract is the spouse, he becomes the owner of the death benefits paid by the insurer. They constitute their own property as established by the Insurance Code (article L. 132-16). Consequently, this capital escapes the reserved heirs (children, etc.) if the level of contributions has not been manifestly exaggerated.
- if the beneficiary is a third party, a share of the capital transmitted goes to the community of heirs.
Article L. 132-23-1 of the Insurance Code (amended by Law Pacte n ° 2019-486 of May 22, 2019) relates to the payment of life insurance funds. It provides that the insurance company has a help 15 days, after receiving the death notice and having read the beneficiary's contact details in order to ask the beneficiary of the life insurance contract to provide him with all the documents necessary for payment.
From the receipt of the documents necessary for payment, the insurer is required to pay into the help 1 month the capital or annuity guaranteed to the beneficiary of the life insurance contract.
Estate and Life Insurance: Taxation
The estate treatment applied to the contract depends on the age at which the contract was entered into, the threshold of 70 constituting a border.
Contributions paid before age 70
Contracts less than € 152,500, the premiums of which were paid before the 70e birthday of the subscriber are exempt from inheritance tax.
Beyond this, a direct debit is due by each beneficiary. It is proportional to the amount exceeding € 152,500. This levy reaches:
- 20% of the fraction of the net taxable share of each beneficiary less than or equal to € 700,000;
- 31.25% of the fraction of the net taxable share of each beneficiary beyond € 700,000 (after deduction of € 152,500 per beneficiary).
Contributions paid after age 70
The inheritance tax exemption is reduced from 152,500 to 30,500 €.
When assets exceed € 30,500, contributions paid after age 70 are subject to inheritance tax (for the fraction exceeding € 30,500). Only capital is taxable, capitalized interest is not.
Estate, life insurance and property wealth tax
If the subscriber of the contract is subject to real estate capital tax, real estate holdings must be declared, but there are exclusions.
They mainly concern Sicavs and FCPs whose real estate investment is less than 20%. SCIs (where the subscriber holds less than 5%) are also excluded from the taxable base as well as real estate used for the professional activity of the taxable person.