While life insurance is a remarkable transmission tool, the tax rules are less advantageous after the age of 70. In fact, the sums saved before this pivotal age benefit from a tax allowance of 152,500 euros per beneficiary, which allows you to transfer large amounts tax-free to your children, grandchildren or even to people without family ties. On the other hand, money paid into a contract after the age of 70 follows a much stricter rule since the beneficiaries of the contract will have to share a tax allowance of only 30,500 euros upon death, in proportion to what they receive.
This ceiling is common to all envelopes held by the subscriber. Beyond this, the amounts received include the death benefits and are taxed at the inheritance tax scale, depending on the family relationship. The deduction can then reach 60%. This is why many savers completely ban life insurance after this age.
Protecting the surviving spouse
But this choice is not always the wisest. First, because it is possible to invest up to 30,500 euros without asking too many questions. In addition, the strategy diverges depending on the quality of your beneficiaries. Thus, the spouse – married or in a civil partnership – remains totally exempt, regardless of the amount paid beyond the age of 70. Life insurance therefore appears to be a good tool for protecting the survivor, especially if one of the members of the couple has a low pension.
Children benefit from a tax allowance of 100,000 euros each on the inheritance and, beyond that, a progressive tax rate that does not exceed 20% up to half a million euros. Depending on the person you wish to reward, the impact is therefore more or less painful. Furthermore, the rule has a small subtlety: the tax allowance of 30,500 euros only concerns payments. The gains made by the latter are exempt. However, at 70, life expectancy is still long and the potential for gain is high. If you are a dynamic investor, you can hope to pass on significant amounts tax-free.
Open new contracts
Warning: the multiplication of rules makes things complex. This is why it is preferable to open a new contract, or several, after this age. Not only will you have better visibility of your assets, but you will also be able to adjust the amounts and beneficiaries according to the contracts and tax regimes, favoring those that are lightly taxed. Finally, if you need cash, you will avoid dipping into those opened after age 70, to limit redemptions on gains, not taxed upon death.