André, reader of Capitaladdresses the following question: “Hello, imagine an individual who has taken out life insurance with a child as a beneficiary. Before 70 years, he paid 152,500 euros, and after 70 years, 30,500 euros. The son will not be taxed up to 152,500 euros. But do the 30,500 euros constitute an additional exemption, after the 152,500 euros? ”
Hello André, and thank you for your question, which recalls the operation of the two tax systems specific to life insurance, the death of the subscriber, depending on the age at which the payments (or bonuses) are made. For the premiums paid on the contract before 70 years, article 990 I of the general tax code provides for an individual reduction of 152,500 euros per beneficiary. This covers both the capital paid and the gains generated by these payments. If the sums transmitted exceed the reduction of 152,500 euros, then payments and gains are taxed up to 20% up to 700,000 euros taxable, then at 31.25% beyond.
For the payments made after 70 years, it is article 757 B which applies: an overall reduction of 30,500 euros is then planned, to be distributed between all the beneficiaries. Beyond that, the remaining sums are reinstated in the succession, but inheritance tax will only be due on the payments, because the interests produced after 70 years remain exempt.
Two distinct regimes, but which are accumulated at the time of the succession
These two regimes are distinct, but can be accumulated. On the death of a subscriber, we will distinguish, on the total of the sums which he bequeathed, those which correspond to his payments before or after 70 years, to apply the abatements to which the beneficiaries are entitled. In other words, the reduction of 30,500 euros applicable to payments made after 70 years does not in any way reduced the reduction of 152,500 euros which concerns the premiums paid before this age.
In the example you offer, your son would benefit from the two mechanisms. The 152,500 euros paid before 70 years, as well as the corresponding gains, would be exempt until this amount. Then, the 30,500 euros paid after 70 years would then be added and would also be exempt.
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