The dismemberment of the beneficiary clause (life insurance)– Get a quote in 3 minutes

Update on the consequences of a dismemberment of the beneficiary clause of a life insurance contract, in particular on the tax level.

When signing a life insurance contract, the holder is invited to designate one or more beneficiaries in the event of death, to whom the sums accumulated on this contract will be paid.

It is perfectly possible, from a legal and financial standpoint, to “dismember” this beneficiary clause in favor of a usufructuary on the one hand, and a bare owner on the other.

Dismemberment of the beneficiary clause: the financial consequences

When the beneficiary clause of a life insurance contract is dismembered, the accumulated capital is paid to the usufructuary, who disposes of it freely.

On the death of the usufructuary, the bare owner will have to recover, in full ownership, all of this capital, which can therefore be deducted, duty free, from the estate.

This patrimonial device is particularly useful for securing the future of his spouse without penalizing his children.

Schematic example: Mr. Martin, who has a life insurance contract worth 1,000, dies. This capital of 1,000 is allocated to Ms. Martin in usufruct and to the children of the couple in bare ownership. Ms. Martin will therefore be able to use this capital as she sees fit.

When Mrs Martin dies, the net assets of the estate are 2,500. Her heirs, the children, deduct 1,000 duty free (initial value of life insurance), with inheritance tax not applicable. on the balance (1,500).

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Dismemberment of the beneficiary clause: the tax consequences

As is often the case in matters of inheritance, the tax rules overlap with the civil rules, which complicates the situation somewhat.

On the death of the holder, the sums accumulated on a life insurance contract may in fact be subject to two types of tax deductions. (see our article on inheritance tax and life insurance).

Classic inheritance tax

Inheritance tax only applies to sums paid by the holder after the age of 70 (and not to interest) on contracts opened after November 20, 1991. And only after an allowance of 30,500 euros, distributed among all beneficiaries.

In this case, when the beneficiary clause is dismembered, the inheritance tax is paid both by the usufructuary and the bare owner in proportion to their respective rights. The respective shares of the usufructuary and bare owners are assessed with the administrative scale and therefore depend on the age of the usufructuary.

In the example above, when Mr. Martin dies, Ms. Martin and the children will therefore pay inheritance tax based on Ms. Martin's age. This will not prevent the children from recovering all of the capital duty-free, as in any dismembered inheritance … By specifying in passing that Ms. Martin will not pay any rights since the surviving spouses are exempt from the “tax package Sarkozy “.

Flat-rate withdrawals

Another tax system applies to sums paid (and interest produced) on contracts signed before November 20, 1991.

The same system applies to premiums paid before the age of 70 and after October 13, 1998 on contracts opened after November 20, 1991.

Principle of this system: the application of flat-rate deductions, after application of an allowance of 152,500 euros per beneficiary, beyond a certain amount.

In this case, in the event of dismemberment of the beneficiary clause, the tax administration considers that the usufructuary and the bare owner are both liable for the lump sum deductions provided for in proportion to their share of the capital paid by the insurer. , calculated according to the administrative scale of usufruct, the allowance being distributed equally on a pro rata basis.

With this clarification that if the usufructuary is the surviving spouse, he will not pay this levy.