Life insurance: can I impose conditions on the beneficiary?
• Is it possible to include such conditions in your life insurance contract?
It’s complicated: for a person to receive the capital of your life insurance, you must designate them in the beneficiary clause of the contract. However, the companies look at these clauses when they are given them, and refuse those which seem problematic to them. If the conditions you want to impose are difficult to enforce, your insurer will not agree.
Insurance companies have neither the power nor the means to enforce your wishes. They cannot require the beneficiary to inform them of his actions and, moreover, have no obligation to monitor him.
And what sanctions could they inflict on him? The capital paid does not belong to them, they have lost all control over it and cannot revoke the transmission made, even if you had specified that, in the event of default by the first beneficiary, the money should go to a second.
• Bequeath to an association
In some cases, a foundation or association authorized to receive bequests may accept, in return for your generosity, to ensure that your wishes are respected. But discuss it with her beforehand. If your wishes turned out to be unattainable for her, she would have to refuse.
• Are some insurers more accommodating?
It is always possible that a beneficiary clause with charges will receive the benevolence of an insurer or escape its vigilance. But this does not imply that your wishes will be respected after your death. It is therefore advisable to discuss with the insurance company beforehand, to study what would be acceptable to them.
• And if the clause is drafted by a notary?
You can, in fact, specify to the insurance company that the clause has been filed with a particular notary. The company therefore does not know what it contains. But the notary will probably not agree to register a potentially problematic beneficiary clause without the prior agreement of the insurer. If he did, he could not guarantee that your wishes would be respected, which is the essential issue.
• What solution, then?
If you want to pass on with charges, you must do so outside of life insurance. You must then withdraw your capital from the contract to place it elsewhere, or specify in the beneficiary clause that it must be reinstated in your estate on your death.
Once again a property like all the others, it may be the subject of a classic bequest, accompanied by charges if the legatee accepts (it is better to make sure of this beforehand). Indeed, it is possible to make a legacy with charges on your inheritance, but not on life insurance which, governed by the insurance code, is not part of it.
• How to plan such a legacy with charges?
Write a will in which you specify that all or part of your property must go to such and such a person, on condition that they respect your conditions.
It is also desirable to appoint another person (with his or her agreement), responsible for ensuring that your wishes will be respected over time, because the notary cannot do this for you. This person can ask the court to cancel the bequest if your wishes have not been carried out.
• What is the taxation in this case?
If the capital has been taken out of the contract to be placed elsewhere or if it has been returned to the estate on your death, the tax advantages linked to life insurance are lost. This capital will, in fact, be subject to the usual inheritance tax.
It’s a shame if you funded the contract before you turned 70, because the exemptions from life insurance are then significant. It is less penalizing for sums paid after your 70th birthday, since they are, in any case, largely subject to the inheritance tax scale.