Life insurance: the 12 most frequently asked questions July 11, 2017

The Revenue made a selection of the twelve questions most often asked by his readers. Here are our answers exclusively.

The Revenue made a selection of the twelve questions most often asked by his readers. Here are our answers exclusively.

1) “Can I change my life insurance account?”

No. Life insurance is not transferable from one bank to another or from one insurer to another. Some contracts are like contracts Madelin or Perp (popular retirement savings plan), but not the classic life contracts held by some 14 million French people.

What if you have a contract that does not suit you, whose performance is disappointing for example? You can close it. Pay attention to the tax consequences. It is often preferable to put him to sleep and not to make further payments. You can also and this is an intermediate solution: make partial withdrawals (“buyouts” in the lingo of the insurers) and put the sums on a more modern, more efficient contract.

In summary, your contract is not transferable but you have a range of solutions if you are not satisfied with your placement.

2) “We would like to have your opinion on the advantages or disadvantages of a succession of the pre-retirement clause applied to life insurance”

There has been a legal debate that has been going on for more than twenty years to find out what the survivor’s life contracts should become in the event of death. The question is simple: does this contract, fueled by the couple, have to enter the estate of the deceased or not? The financial and fiscal stakes are colossal. Today, the answer is yes. It is not good news. That said, the tax doctrine can evolve.

Two remarks:

– There are multiple interactions between matrimonial regimes and life insurance. We have to be concerned. Talk to your insurer. To his notary.

– There are different parries to what is called the “Bacquet answer”. Co-accession, cross-membership. It is also possible to adjust his matrimonial regime, in particular with a precipitation clause that allows the unresolved contracts to be attributed to the surviving spouse without having to be reinstated in the estate assets of the heirs.

What to remember: if you are married under the legal regime of the community reduced to acquests as 80% of the French you feed a contract opened in the name of gentleman with money saved by the couple. If madame dies: half of the sums appearing on the contract will fall into the estate, which may require to break the contract. To avoid getting there and reducing rights there are solutions. To be studied on a case by case basis with its insurer and its notary.

3) “I will inherit a sum of about 100,000 euros. Should I opt for a safe euro fund or a multi-unit life insurance policy? “

There are two types of life insurance contracts. Classic life insurance with monosupport contracts in euros, with no risk on capital, with a ratchet effect on interest, which means that once registered, they can not be withdrawn. More recent and more modern multi-product contracts are more complex. This type of contract is like an envelope in which there are different funds: the euro fund of monosupport contracts, but also funds invested in shares. Depending on the investment media chosen, your investment is more or less risky.

4) “How can I boost my life insurance policy?”

The simplest solution is to subscribe to a so-called “structured” fund,which promises you a portion of the stock market increase while offering you a guarantee on partial or total capital excluding fees on installments and contract management. This is the easiest solution but with a high probability of disappointment because this guarantee has a cost and the performance of the fund depends on a mathematical formula not always readable even for a savvy saver.

90% of life insurance policies, once subscribed, take dust at the bottom of a drawer. It is a mistake. A life contract is managed a bit like a securities account. This is not to multiply the round trips during the day but to carry out some arbitrations a year in order to adapt the content of your contract to the evolution of the financial and economic situation. Depending on your personal situation and your objectives, dare the Exchange for 5 to 20% of the sums invested in your contract.

5) “Is money in a life contract stranded for eight years?”

In a modern life insurance contract, which the insurers call “pay and withdrawal contract”, you can, as the name indicates, pay and withdraw the money at any time. With a few nuances: many contracts provide a minimum amount of payment, ranging from one hundred euros to several thousand. Similarly for withdrawals. The insurer may impose, under the general conditions of the contract, a minimum amount to be withdrawn. Sometimes, it allows the withdrawal of the sums invested only after one year.

Fiscally speaking, it is only after eight years that life insurance becomes interesting: the tax levy is less important, and above all it is possible to withdraw every year from his contract, without any taxation, 4,600 euros of Earnings for a single or 9,200 euros for a couple.

6) “Is it still worthwhile to appoint a spouse as a beneficiary of a life insurance contract?”

The law to promote work, employment and purchasing power (Tepa), adopted on August 21, 2007, substantially changed the law of inheritanceby totally exempting the subscriber’s spouse or partner from paying these rights, A PACS.

At first glance, it may seem useless to pass on tax-exempt capital to someone who no longer has to pay for it. But it is possible, in this way, to give his spouse more than the law provides for inheritance. However, before acting, it is better to consult a notary or the wealth management service of the insurance company. It is possible to protect your spouse by other means, such as a dismembered donation or a change in the matrimonial regime.

If you have children from a previous union, you will have to reconcile spousal protection and the interests of the children. As such, it may be more effective to appoint beneficiaries of a contract to the children rather than the spouse.

7) “I am considering taking out a life insurance policy and I am concerned about the wording of the beneficiary clause …”

You are right to be interested in a key part of your life contract. The beneficiary clause must always be drafted with care. If this is not the case, your capital could be cashed by someone who is not the one you want.
Reminder: Life insurance remains in France without succession. This means that in the event of death the capital entered in the contract goes to the beneficiaries designated by the subscriber and not to the legal heirs designated by the Civil Code.

Contracts often include a standard clause providing that the principal will be paid “to the spouse; Failing that, to children born or to be born, living or represented, in equal parts; In default thereof to the heirs or assigns of the subscriber “.

Think of the will as well. This is a good method to name one or more beneficiaries without canceling the tax benefits of life insurance. This allows you to change when you want while offering maximum discretion.
Think of naming several beneficiaries. Failing this, the capital could reinstate the estate if the beneficiary himself died on the day you disappeared.

8) “What do you think about Luxembourg life insurance policies? “

These products are attractive to wealthy and well advised savers. Contrary to popular belief, they are not of interest for tax purposes. Worse, even without making a repurchase, you must carry them in your income tax return like all your accounts held abroad. And of course they come back to the taxable base at the ISF.

Luxembourg life contracts have two strengths:

– The legal firewalls of multi-unit contracts would allow them to resist better in the event of a systemic crisis that would cause the failure of large insurance companies.
– Their greater management flexibility. You can put real estate, unlisted shares, vivid securities, change managers more easily, invest in assets listed in different currencies.

Main drawbacks:
– Sometimes high fees
– Lack of transparency and responsiveness of contract management services.
In short, they are reserved for wealthy savers (over 250,000 euros per contract).

9) “I have 50,000 euros to place. I hesitate between feeding an old life contract or opening a new one? “

Feed your old contracts, if they meet your needs in terms of returns and diversification . If not, enter a new Trophée d’Or du Revenu contract. It is recommended to hold several life contracts to diversify and optimize its taxation, in the event of withdrawal in particular.

10) “My life insurer has just informed me that it will no longer reference the fund on which I am invested. Is this practice legal? “

The Insurance Code (Article R 131-1) stipulates that “the contract shall provide for the manner in which, in the event of the disappearance of one unit of account, another unit of account of the same kind shall be substituted for it by an addendum to the contract “.
So much for the theory. The practice is more complex. When you have a life insurance policy that offers multiple media options, various events can change the list of accessible funds. The company that manages a fund may decide to merge it with another or create new shares, one for individuals, one for institutional investors, for example. A fund may also disappoint and no longer be offered.

Review the general terms and conditions, in particular the appendix to the presentation of the investment documents providing for the procedure for substitution, including the possibility of arbitration without charge.

11) “My mother is 72 years old, and I wonder for her: is life insurance a good investment after the age of 70?”

Yes, life insurance remains attractive after 70 years. On the tax side, you have two advantages: the payments are exempt from inheritance tax in the amount of 30,500 euros, and all the gains generated by your payments after 70 years are totally exempt from duties. Attention, there are some precautions to take. To avoid worries with the tax or your heirs, the amounts of your payments must not be exaggerated in relation to all your assets.

12) “I have taken out ten life insurance contracts. I know it’s too much, but I do not know how to do the housework … “

Like you, many savers subscribe to life insurance “to take a life” or because they benefit from attractive underwriting conditions. Then they no longer touch it, tetanized at the idea of ​​closing a contract that gives them certain tax advantages for income tax or inheritance tax.

There is no tax benefit to maintain an uninteresting investment. Especially when the sums placed are weak. You should consolidate your savings into the euro contracts and the euro funds of the most profitable multi-holdings. Do not hesitate to close the oldest, often mediocre contracts. Money paid before October 13, 1998 in contracts opened before November 20, 1991 is totally exempt from inheritance tax. This is an advantage only for large heritages. The others are, in any case, exempt from inheritance tax.

Categories Life Insurance

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