Catherine, reader of Capitalasks us the following question: “Hello, my bank manager told me that it was not obligatory to mention life insurance in the inheritance declaration. Can you confirm this for me? THANKS.”
Hello Catherine, and thank you for your question, which touches on an essential particularity of life insurance: this investment is not part of the estate. However, it is not completely ignored by the tax administration.
Life insurance is “excluding inheritance”, but not excluding tax declaration
Indeed, as the regulations remind us (article L132-12 of the Insurance Code), the sums paid to the beneficiary(ies) of a life insurance contract are not included in the estate. This means that the capital is not shared between the heirs according to the classic rules of kinship, but goes directly to the beneficiaries designated in the contract. This also means that the sums thus transmitted escape inheritance tax.
On the other hand, insurers have the obligation to report to the tax administration the existence of these contracts and the amounts paid. This allows the administration to verify that the reductions specific to life insurance – 152,500 euros for payments made before age 70 for each beneficiary, 30,500 euros after 70 years for all beneficiaries – have been correctly applied and that the appropriate taxes have been paid.
In other words, Catherine, life insurance is not included in the classic inheritance declaration, but must be declared separately by the insurer. In addition, if you are the beneficiary of life insurance with payments made after age 70, you may receive a pre-filled partial inheritance declaration from the insurer. It will then be necessary to verify the information mentioned, and return the document to the tax services. After the reduction of 30,500 euros, the sums paid after age 70 and transmitted to the beneficiaries are in fact subject to inheritance tax.
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