Life insurance and inheritance tax

Life insurance protects or favors one or more people in the event of death. The tax treatment for paid-in capital varies depending on the contract and at times waivers inheritance tax

What is life insurance?

Life insurance is a contract by which the insurer undertakes to pay a capital sum to a named person in the event of the policyholder's death, in exchange for the payment of one or more premiums.

How to name the beneficiary(ies) of life insurance ?

The subscriber is of course completely free to designate the beneficiary or beneficiaries of his choice. He can do so at any given time, either on the day when the contract is signed with the insurer, or afterwards... In practice, this designation is mentioned in writing on the insurance contract itself or on another document, like a will for example.

The major advantage of the designation of the beneficiary by will is bound to absolute secrecy. The subscriber retains complete freedom, especially if he wishes to change beneficiaries (thus he doesn’t need to justify himself). However in this case, it is advisable to specify in the insurance contract that the beneficiary will be designated by will, not forgetting to mention, if applicable, the contact details of the notary depositary, of the deed.

Are life insurance contracts subject to inheritance tax?

On the subscriber’s death, the sums paid to the beneficiary of the life insurance contract do not form a civil part of the estate of the deceased . Contracts taken out for the benefit of a spouse or civil union partner, certain non-profit organizations and, under certain conditions, contracts taken out for the benefit of brothers and sisters, are exempt from any taxation.

When other beneficiaries have been designated, the rules are as follows:

  • For contracts subscribed after November 20, 1991, the share of capital corresponding to premiums paid by the subscriber after his 70th birthday is subject to inheritance tax (according to the rules of common law) for their fraction that exceeds 30,500€;
  • Before the age of 70, a specific flat-rate deduction after application of a reduction of 152,500€ per beneficiary, applies to the sums received by the beneficiary(ies) when they correspond to premiums paid by the subscriber since the 13th. October 1998 (including those paid by an insured aged over 70 on a contract, taken out before November 20, 1991); its rate is 20% on the taxable fraction of each beneficiary, which does not exceed 700,000€ and goes beyond 31.25% .
  • An additional reduction of 20% applies before the reduction of 152,500€ in the case of a " life generation " contract.

Do not hesitate to contact your notary. The latter shall give you advise on the most suitable contract, depending on the personal situation.

  • If you have already subscribed to a contract and wish to modify the beneficiary clause, the notary will support you and shall draft it.
  • If you are the beneficiary of a life insurance contract, also consult your notary before you move forward. It will help you understand the various tax implications.

Did one of your relatives has just died?

Refer to the guide "Estate settlement".

Frequently asked questions