Life and inheritance insurance: late payment can be very expensive for beneficiaries

The life insurance holder wanted to make a payment on his contract before he turned 70 so that his beneficiaries could take full advantage of the tax advantages upon his death. This was without taking into account the reaction time of his bank and the passing of this anniversary date.

A delay of a few days can change everything about your estate if you have taken out a life insurance. Because this savings product, which is very tax-advantageous during withdrawals, is even more so upon your death, with each of the designated beneficiaries of the contract benefiting from a reduction (a tax free) of 152,500 euros. A flat-rate levy of 20% then applies to the first 700,000 taxable euros, then 31.25% beyond this amount. These rules are valid on one condition, however: that the payments were made by the subscriber before turning 70. After this age limit, a reduction of “only” 30,500 euros is shared between all beneficiaries, the possible balance being subject to the inheritance tax.

A difference in tax treatment of which a customer of Crédit Agricole Mutuel des Savoie is fully informed who, on March 5, 2016 – a few days before his 70th birthday – took out a life insurance contract with Predica, the Crédit agricole insurance company, and designated his two grandchildren as beneficiaries. He then deposited a check for 150,000 euros credited to his account on March 8 and asked his bank and his insurance subsidiary for payment into his contract as soon as possible. The objective is clear: the premium must be transferred to the life insurance by March 11 at the latest, the day before his birthday.

No death, no tax loss

Problem: it was only on March 14 that Crédit Agricole and Predica transferred the funds. After the deadlineSO. Noting that the inheritance rules applied to his contract upon his death will be less favorable, the subscriber attacks the regional fund of Crédit Agricole Mutuel des Savoie and Predica to obtain compensation for his damage. After the rejection of his request by the Annecy court on May 28, 2020, it was confirmed by the Chambéry Court of Appeal on September 6, 2022. The second court considers that the tax loss – the submission to inheritance tax of a significant part of the premium paid on the contract – is not certain, the latter being able to be noted only upon his death.

An interpretation shared by the Court of Cassation, which rejects the saver’s appeal on September 11, 2024, and also specifies that “the payment of transfer duties due following the death of the subscriber of a life insurance contract being the sole responsibility of the beneficiaries of the contractthere can be no tax loss for the insured person.. “The contract has not been terminated, therefore the taxes are not due and the damage has not been proven,” explains Nathalie Couzigou-Suhas, notary in Paris. Thus, if there is harm, it will be at the expense of the grandchildren who, upon the death of the subscriber, will be able to try to assert their rights. “Nothing will prevent them from invoking this damage if they prove that the bank could be held liable. They must keep the evidence»advises the expert.