Life insurance remains one of the French’s favorite investments, not only for its yield but above all for its tax advantages in the event of the transfer of assets. However, some specific clauses remain unknown to the general public, in particular the one relating to payments after the age of 75. This specific tax provision can allow, in some configurations, to transfer up to an additional €30,000 to your beneficiaries, without them having to pay exorbitant inheritance taxes.
Life insurance benefits from a preferential tax regime in terms of inheritance. Most savers are aware of the reduction of 152,500 euros per beneficiary for payments made before the age of 70. What is less known, however, is that there is a special provision for payments made after age 75.
A tax advantage of 31,865 euros per beneficiary
Amounts paid into a life insurance contract after the subscriber has reached the age of 75 benefit from a specific reduction of 31,865 euros per beneficiary. This sum is not negligible and can represent a significant saving when transferring assets. Beyond this reduction, the capital transferred is subject to traditional inheritance tax, calculated based on the relationship between the deceased and the beneficiary.
This tax provision constitutes a real opportunity for elderly people who wish to optimize the transmission of their assets, even at an advanced age.
To understand the usefulness of this clause, let’s take the example of a 77-year-old person who wishes to invest 100,000 euros in life insurance for the benefit of his three children. Thanks to the reduction of 31,865 euros per beneficiary, each child will be able to receive approximately 33,333 euros (equitable distribution), of which 31,865 euros are exempt from inheritance tax. Only the difference of 1,468 euros per beneficiary will be subject to inheritance tax.
Without this provision, all monies paid after age 75 would be included in the estate and taxed according to the usual rules of estate law.
Optimization strategies based on this specific clause
This little-known life insurance provision can be integrated into a larger estate strategy, allowing you to maximize tax benefits during the move.
The multiplication of beneficiaries to optimize the reduction
An effective strategy is to designate multiple beneficiaries for the same life insurance contract. Since the reduction of 31,865 euros applies to each beneficiary, by multiplying the number it is possible to increase the total exemption. For example, with six beneficiaries the overall reduction can reach 191,190 euros (6×31,865 euros).
This approach is particularly relevant in large families or when the subscriber wants to reward multiple people, even outside the immediate family circle.
Co-membership contracts: a complementary solution
Another strategy is to enter into co-membership contracts with settlement upon second death. This formula, particularly suitable for couples married under a community regime, allows the assets to be reduced upon the death of the first spouse.
By combining this approach with the specific reduction after the age of 75 it is possible to further optimize the transfer of assets and significantly reduce the tax burden on the heirs.
Precautions to take to avoid pitfalls
Despite its undeniable advantages, the use of this life insurance clause requires some precautions to avoid falling into traps that could nullify its benefits.
The risk of clearly exaggerated premiums
One of the main points of concern concerns the notion of “manifestly exaggerated premiums”. Although there is no precise legal definition of this concept, it is regularly referred to in the Insurance Code to protect heirs, spouses or creditors.
Courts assess the exaggerated nature of a premium based on several criteria, in particular the age and financial situation of the subscriber at the time of payment, as well as the usefulness of the transaction. If a bonus is judged to be clearly excessive, it may be reinstated in the assets and thus lose its tax advantage.
The importance of comprehensive estate planning
The use of the allowance after the age of 75 must be part of a broader financial consideration. Life insurance contract management fees can significantly erode capital over the long term. For example, a saver who has invested 100,000 euros over twenty years, with total annual commissions of 1.5%, can lose more than 30,000 euros of capital compared to an investment with lower commissions.
It is therefore essential to compare different savings and transmission solutions, taking into account not only the tax advantages but also the costs and potential returns.
Complementary alternatives to life insurance
While life insurance after age 75 has some benefits, other mechanisms can complement an effective wealth transfer strategy.
The Pension Plan (PER): advantages and limits
The PER is a pension investment that is enjoying growing success but whose specifics are often poorly understood. It offers tax advantages upon entry, but also has some pitfalls to avoid, particularly in terms of fees and exit conditions.
Unlike life insurance, PER does not offer the same pass-through benefits. However, it can be integrated into an overall wealth strategy, in particular to optimize taxation in the savings phase.
The donation of temporary usufruct: an alternative strategy
Another approach is to resort to the donation of temporary usufruct, which is particularly suitable for helping adult children. Instead of paying a pension to finance their studies, parents can transfer the right to the income produced by the property for a fixed period to their children.
This solution allows you to reduce the tax burden by financially supporting your children during their studies or their entry into professional life.
To take full advantage of this life insurance clause after age 75 requires a structured approach.
The importance of personalized consultancy
Because every asset situation is unique, we recommend that you consult a wealth management consultant or notary to determine a strategy that is appropriate for your personal, family and tax situation.
These professionals will be able to analyze your entire assets and offer you the most suitable solutions, integrating life insurance into an overall transmission strategy.
The optimal payment program
The timing of payments on a life insurance contract is crucial. To optimize taxation, it may be appropriate to make substantial payments before the age of 70 to benefit from the reduction of 152,500 euros per beneficiary, and then continue to finance the contract after the age of 75 up to the new reduction of 31,865 euros per beneficiary.
This staggered approach allows you to maximize tax benefits while preserving some flexibility in asset management.
Legislative developments to watch out for
The tax framework for life insurance, while relatively stable, is a recurring topic of discussion during budget debates.
Prospects for changes in the tax system
In a context of tension on public finances, some tax advantages of life insurance could be called into question. It is therefore important to remain attentive to legislative developments and adapt your heritage strategy accordingly.
Heritage professionals generally recommend not waiting for possible reforms to implement a transmission strategy, because the most favorable provisions are often accompanied by escape clauses that preserve acquired rights.
The potential impact of pension reforms on long-term savings
Subsequent pension reforms encourage the French to diversify their long-term savings. In this context, life insurance remains a privileged instrument, but its complementarity with other devices such as the PER must be carefully studied.
The possibility of transferring capital at advantageous tax conditions, even after the age of 75, is a great advantage of life insurance which should continue to exist despite regulatory developments.
Life insurance after age 75 therefore offers often overlooked opportunities to optimize the transmission of wealth. Thanks to the specific deduction of 31,865 euros per beneficiary, it allows you to transfer more capital without increasing the tax burden of the heirs. Integrated into an overall heritage strategy, this provision can represent a significant lever for preserving and passing on the fruit of a lifetime of work. In an ever-changing tax environment, this little-known clause deserves the full attention of savers eager to optimize the transmission of their wealth.
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