About a stop:
Cass. civ., 1st, of December 16, 2020, n ° 19-17517, from which we draw important practical recommendations.
Once again, the judges of the Court of Cassation were faced with the application of the provisions of Article L. 132-13 of the Insurance Code relating to the exaggeration of premiums paid on a life insurance contract.
The obvious exaggeration leads to the ratio of the premiums concerned, and not of the death benefits, to the mass to be shared within the framework of the sharing operations.
The beneficiary, daughter of the deceased, is ordered to return, at the request of her nephews coming to represent the other child of the deceased, all the premiums paid. Premiums of particular importance: more than one million euros was in fact paid between the years 1995 and 1998, i.e. ten years before the death of the insured, aged less than 70 years at the time of these payments .
Taking into account the circumstances in which the bonuses were paid, the Court of Cassation shares the conclusion of the judges of the Douai Court of Appeal considering the bonuses ” exaggerated “, While criticizing the trial judges for having demanded the report not of premiums but of capital from contracts unwound on the day of death.
Once again the Court of Cassation recalls that it is advisable to place oneself, not on the day of the unwinding of the contracts, but on the day of the payment of each premium in order to appreciate the exaggeration, that is to say utility.
It is particularly interesting to consider the definition given by the Supreme Court of the utility of remittances:
“… These investments, made mainly in the form of a single premium for particularly large amounts, representing 61% of the estate assets, were not part of a specific project such as the financing of accommodation costs in retirement homes and did not present any personal or economic interest but their sole purpose was to subtract most of the assets of the estate for the benefit of a single heir, so that proof of the manifestly exaggerated nature of the premiums paid is provided ”.
The Court of Cassation recalls, in doing so, that utility of the contract is part of a provident scheme, totally legitimate and justified when the insured (who could not do it) notes that the lengthening of life may justify accommodation in a retirement home; or when he anticipates that this lengthening may be accompanied by an alteration in cognitive abilities and the development of chronic diseases, such as Alzheimer’s or Parkinson’s, requiring either the presence of caregivers or admission to specialized establishments. In these situations, the insured thus anticipates the future commitment of increasingly expensive care.
Anticipating a possible vulnerability, a possible home support, accommodation in a quality medical establishment, must result in the accumulation of sometimes very significant capital to provide resources in order to cope with these induced expenses, while income (retirement) are constrained by the constant increase in the number of retirees.
Suppose that the remainder to be borne by the insured is 5,000 euros per month, or 60,000 euros per year, it is necessary to have accumulated, therefore saved, 3 million euros for a rate of return of 2% that is to say say for a risk-free investment, fully available, perfectly divisible. Paying significant premiums on its or its life insurance contracts, is in this perspective perfectly “Useful” in the sense given by the Cour de cassation.
It is therefore important that when the premiums are paid, the insured person clearly expresses that he is considering his approach in this perspective. If by chance he is not confronted with the anticipated expenses then the available balance can be transmitted to the designated beneficiaries without fear of being qualified as exaggeration.
PRACTICAL RECOMMENDATION
EXAMPLE OF MAIL ADDRESSED BY A CGP TO ITS CUSTOMER
Monsieur…..
You asked me to fund your insurance contracts by successive payments, depending on your financial availability, present and future. You are wondering: on the one hand, about the relevance of additional investments in life insurance; and, on the other hand, on the existence of limits on the payments made.
Your questions are linked to the observation that you make of the probable lengthening of the lifespan of each of us. In this regard, given your current age, 70 years, your life expectancy is close to twenty years. You have noticed that this lengthening is unfortunately sometimes accompanied by a possible deterioration in living and survival conditions. You are not wrong. Chronic diseases, such as Parkinson’s, Alzheimer’s can affect us, can you achieve.
You tell me that you noticed that in your entourage, several people due to poor health had to be hospitalized in specialized establishments. You were surprised by the importance of the cost of this medical accommodation or not.
You have clearly expressed to me your desire to anticipate the occurrence of these events with costly consequences by paying on your insurance contract, on the one hand, part of your monetary reserves, and on the other hand, part of the price. of the sale of a recently completed investment property.
We can only encourage you in this approach, life insurance has qualities perfectly suited to your heritage concerns: a “chosen and controlled” level of risk, thanks to a diversified backing (contracts in euros in whole or in part, contracts in units of account at risk), fully available and perfectly divisible capital on the basis of Article L 132-21 of the Insurance Code.
We have simulated in view of the requirements that you express, in particular as regards the quality of medical accommodation, that the remainder of the charge could be of the order of 50,000 to 60,000 euros per year, difficult to finance because it greatly exceeds your pensions. current. However, to generate an annual return of this order, you must have accumulated in your contracts, at very moderate risk, of the order of 2,000,000 to 3,000,000 euros. This savings will be at your complete and perfect disposal to meet these possible expenses.
There are no limits to the sums invested in insurance other than those coming from expenses to be financed by income from accumulated capital. Provide the occurrence of unpleasant events and the resulting costs is perfectly legitimate.
You have fully understood that at the end of your life the capital not consumed, will constitute a death benefit accruing to the beneficiaries designated by you.
You told me you wanted to designate your wife as beneficiary, knowing that from a first union you had two children whose relationship with their mother-in-law is far from cordial.
Could they contest this allocation of the death benefit? He could certainly do so on the basis of article L 132-13 of the Insurance Code, but with very limited chances of success insofar as the accumulation of premiums in your contract are, given your wise concerns clearly expressed, perfectly “Utility”, in the sense given by the supreme judges in the judgment of the Court of Cassation dated December 16, 2020 (n ° 19-17517), of which I have given you a copy.
I am at your disposal to complete the payment formalities on your contract.
Thank you for paying me my fees which I had indicated to you the probable amount, namely….
Done at ………… .., on ………… ..
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