Succession: the most advantageous life insurance after 70?

With more than 1,800 billion euros in assets, life insurance is the preferred financial investment of the French. Among its many advantages, we can obviously cite its most advantageous tax framework to pass on to loved ones. But many savers mistakenly think that once they reach the age of 70, it is too late to take advantage of it. Indeed, the tax rule evolves in life insurance depending on whether the payments were made before or after the age of 70. Before age 70, article 990 I of the CGI applies. Thus, each beneficiary benefits from a reduction of 152,500 euros on the redemption value of the contract. A fixed tax of 20% is then withheld up to 852,500 euros, then 31.25% beyond that.

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For payments made after age 70, except for contracts opened before November 20, 1991 (they follow article 990 I of the CGI), the contract is treated for tax purposes on death as an asset of the estate (article 757 B of the CGI). It is then the inheritance rights that apply in a classic way. At first glance, this development may seem less favorable because the rates applied to an inheritance (up to 45% in direct line and 60% for a third party) are most often higher than the flat rates (20%, then 31.25% ) applied to payments made before age 70.

A new allowance of 30,500 euros and an exemption from earnings

However, payments made after this age can be particularly advantageous. And this for two main reasons: on the one hand, a new allowance of 30,500 euros, common to all non-exempt beneficiaries, applies. On the other hand, all gains generated by payouts after age 70 are exempt.

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Let’s take an example: Sylvie, who has just celebrated her 70th birthday, wishes to invest the sum of 150,000 euros following the sale of a property. At this age, the life expectancy of a woman is on average close to 19 years (according to INSEE). Assuming a return of 3% net per year, his savings will be valued at 263,026 euros on his death, 19 years later. Excluding life insurance, the sum will be fully taxed with inheritance tax. By using a life insurance contract fed after 70 years, the taxable part will only be 119,500 euros (150,000 euros – 30,500 euros), more than half as much.

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Now let’s imagine that Thomas, Sylvie’s child, is the sole beneficiary of the contract and the sole heir to her estate. The rate of the direct line inheritance tax scale is in our example 20% (range of 15,933 euros to 552,324 euros, after deduction). The tax cost here is only 23,900 euros in life insurance (119,500 euros x 20%). Excluding life insurance, the cost would amount to 52,605 euros (263,026 euros x 20%), or 28,705 euros more. The use of the life insurance envelope after age 70 is then clearly favorable.

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Life insurance after 70 can even come out a winner

Let’s take our example again and increase the amount of the payment made at the age of 70 by Sylvie to 300,000 euros. The capital constituted after 19 years will then amount to 526,052 euros. The tax cost of the transmission will be 53,900 euros in life insurance and almost double, 105,210 euros exactly, excluding life insurance.

And to go further, imagine now that Sylvie was able to fund her life insurance contract just before her 70th birthday, so that Thomas could benefit from a significant reduction of 152,500 euros. The tax cost here would have been 74,710 euros (373,552 euros x 20%), or more than 20,000 euros more than on life insurance after 70 years.

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Unexpectedly, fueling a contract after age 70 may even become more favorable than before that age. Earnings exemption being the main reason. As you will have understood, life insurance is advantageous, at any age, to prepare for the transmission of one’s assets. Provided, of course, that you master all the subtleties of placement.