What fate for life insurance on the death of a spouse?

1/ What happens to the life insurance contract of the deceased?

Life insurance is settled under the conditions set out in the contract, most often on the death of the subscriber. The contract is then closed and the capital goes to the people he has designated in the beneficiary clause. In his words:

– either the sum is divided between different beneficiaries;

– or it is dismembered: for example the surviving spouse receives the usufruct and the children the bare ownership.

The capital of the life insurance taken out by the deceased does not enter into the estate: it is not taken into account to determine the share of inheritance which is due to each.

It is subject to variable taxation depending on the date on which the life insurance contract was opened, the date of the payments, the age of the subscriber then.

For a contract taken out before 20/11/1991 and funded before 13/10/1998, for example, no tax is due. In other words, the capital transmitted to the beneficiary is totally exempt from inheritance tax.

For payments made after 13/10/1998 and contracts opened from 20 November 1991, the tax regime is the most favorable when the subscriber funds his life insurance before the date of his 70th birthday: each of the beneficiaries can receive, in total, up to €152,500 (via one or more contracts) tax-free.

Read also: Life and estate insurance: two advantages to remember

No inheritance tax for spouses and PACS partners

Married people and PACS partners receive the capital of the life insurance policy taken out for their benefit by their spouse or partner without the right to pay to the tax authorities.

A bit of vocabulary!

The subscriber is the one who signs the life insurance contract and makes the payments.

The insured is the person on whom the risk rests. On his death, the contract is undone, the capital is given to the beneficiaries. In general, the insured is the underwriter. But it is possible to insure your spouse and provide that the contract will be settled on the death of the second spouse.

The beneficiary is the one designated in the contract to receive the capital on the death of the insured.

2/ What about surviving spouse’s life insurance?

If the spouses had not entered into a marriage contract, their union is subject to the regime of community reduced to acquisitions. Investments, opened during the marriage and fed by their income (salary, retirement, rents collected, etc.), and in particular life insurance contracts are considered as common values. This means that each has half of it.

The surviving spouse’s life insurance contract will not be settled, but will fictitiously belong to the community.

The share of each heir will be determined taking into account this value. Example: Mr. A died leaving his wife and Luc, a son born from a previous union. Mr. A’s estate represents €300,000 (including €25,000 corresponding to half the value of Mrs. A’s life insurance contract) to which must be added a life insurance contract in favor of Mrs. A of €80,000 . Since Mr. A has not taken any particular measures, the rules of the Civil Code apply: it is up to Mrs. A a quarter of the estate i.e. €75,000, plus €80,000 in life insurance and €225,000 for Luc. The life insurance policy becomes the exclusive property of Mrs A.

Read also: Inheritance, reversion: what rights for married, PACS or common-law couples?

3/ Is inheritance tax due on survivor’s life insurance?

Nopefor deaths occurring on or after July 1, 2016, half the value of the unsettled life insurance contract of the surviving spouse does not appear not in the estate tax return.

Let’s take the example again: the spouses being exempt from inheritance tax on what they inherit from their spouse, Ms. A has nothing to settle. The son Luc is entitled to an allowance of €100,000 for the calculation of rights if he has not received a gift from his father within the 15 years previous ones. He will therefore be taxed on €100,000 (€225,000 – the €25,000 of Ms. A’s insurance contract – the €100,000 reduction).

Good to know! If you open a life insurance policy with money received by gift or inheritancethis one belongs to you provided that the origin of the funds is specified in the clauses of the contract. It will then not be taken into account when your spouse dies.

With Me Murielle Gamet, notary in Paris, Cheuvreux Notaires office.

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