Inheritance: “Do you still need to take out life insurance after age 75 to pass on?”

A reader of Capital wonders about the benefit of opening life insurance and continuing to pay into it after age 75. It is true that this savings product loses its attractiveness for transmission after the age of 70, but it remains an investment that should not be neglected.

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A reader of Capital, Hanita, asks us this question: “Hello, is it possible to open or top up life insurance after age 75? And if this is indeed possible, can the money invested benefit the designated people, or does it fall into the inheritance?

Hello Hanita, we thank you for your question, which allows us to come back to the inheritance advantages that life insurance offers you, and to the interest of this savings product after the age of 70. To answer your very first question straight away: yes, it is entirely possible to open life insurance after age 75. In reality, everyone has the right to open one, whatever their age, with parents even being able to do so on behalf of their child from birth.

It remains to be seen whether it is wise to open and replenish this product – generally considered a “long-term” investment – once it has passed the 75 spring mark. If your savings plan is to pass on your capital, as you seem to suggest, then yes, life insurance remains an ideal investment. The money invested may indeed benefit the people you have designated in the beneficiary clause of the contract, and will not enter your estate.

After age 70, life insurance is less advantageous, but remains the best option

Two warnings, however. You must first keep in mind that after the age of 70, payments made on life insurance are less advantageous in order to limit inheritance tax. For payments made before age 70, all beneficiaries benefit from a reduction on inheritance tax of 152,500 euros. To put it another way, for any sum transmitted between 1 and 152,500 euros, each of the designated beneficiaries is exempt from duties.

On the other hand, after the age of 70, this reduction is limited to 30,500 euros, and above all, it applies to all beneficiaries, and not to each of them! At age 75, you will therefore only be able to bequeath a maximum of 30,500 euros to all designated people. Beyond that, they will have to pay inheritance tax, unless it is your spouse, who will remain completely exempt. Likewise, this rule only applies to payments made on your life insurance, and not to the interest or capital gains it will have generated.

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Let’s take an example to see it more clearly. “Let’s imagine that you paid 100,000 euros into your life insurance after age 75. With the reduction of 30,500 euros, 69,500 euros will return to the estate, explains Eric Fraga, Asset Manager at Equance. It remains to be seen who the beneficiary(ies) are: if it is the spouse, he or she will also be exempt from inheritance tax on the 69,500 euros. Likewise, children in direct line benefit from a reduction of 100,000 euros. On the other hand, if they are people outside your family, or your grandchildren – if they do not inherit in place of their parents – they will be taxed on this last sum according to the general scale of inheritance tax. But let’s imagine that your life insurance allowed you to generate 50,000 euros. In this case, the value of your contract upon your death is 150,000 euros. This capital gain will also be exempt, because only the part corresponding to the payments after deduction, i.e. 69,500 euros, will be subject to inheritance tax, even if the designated beneficiary is not the spouse.

Beware of the risk of the estate being sued by your heirs

As you can see Hanita, the inheritance benefit of life insurance after 75 years will depend above all on your family relationship and the number of people you designate. In summary, if you only nominate one person, anda fortiori it concerns your spouse or a direct relative, life insurance remains very interesting, because they will benefit from the life insurance reduction, then from their personal reduction as a member of your family on the rest of your estate. Life insurance also remains the preferred vehicle to transfer outside of inheritance to a loved one outside the family circle (friend, partner, association, etc.). However, in this case, be careful to respect some good practices regarding the frequency and amount of payments, in order to avoid any risk that your estate could be attacked by your legal heirs, if they feel wronged, and reclassified as a donation. disguised.

Capital answers you

Do you have a question about your life insurance contract, your savings accounts, your real estate investments? Ask our expert who will answer you: [email protected]