Succession: “Should you take out several life insurance policies to increase the reductions?”

A reader of Capital wonders if, by taking out several life insurance policies with different beneficiaries, he can multiply the reductions on inheritance tax.

Patrice, reader of Capital, asks us the following question in reaction to our response on the inheritance benefit of life insurance after age 75: “Hello, to the extent that the exemption from inheritance tax is applicable when the beneficiary is in direct line up to 100,000 euros, can we take out as many life insurance policies as there are beneficiaries? For example, I have 400,000 euros to invest, I open four life insurance policies, one for each of the heirs of 100,000 euros. Is this possible?”

Hello Patrice, and thank you for your question, which will allow us to provide a little more detail on the rules applicable to life insurance in the event of inheritance. To answer you straight away, nothing prevents you from first taking out several life insurance contracts with different insurers or with the same actor. There is no legal limit on this point. It remains to be seen whether multiplying these savings products is more interesting for you in terms of inheritance.

For payments before age 70, a reduction of 152,500 euros for each beneficiary

We must again distinguish here between payments made before and after age 70. On the part of your capital which corresponds to the sums paid before your 70th birthday, all designated beneficiaries benefit from a reduction in inheritance tax of 152,500 euros. In other words, for any capital transferred between 1 and 152,500 euros, each of the designated beneficiaries is exempt from inheritance tax.

You can therefore bequeath 100,000 euros to each of your four beneficiaries tax-free, including with a single contract: “In the case of payments before age 70, having a single contract with 400,000 euros or 4 contracts at 100,000 euros changes nothing for the heirs”confirms Jérôme Jabaud, general director of SEGEFI (European Financial Management Society).

For payments after age 70, it is impossible to multiply the reduction of 30,500 euros

The question arises more for payments made after age 70. In this case, the reduction is only 30,500 euros, and above all, it no longer applies to each of the beneficiaries, but to all of them. Clearly, in your example, with a single contract of 400,000 euros, your four beneficiaries in equal shares (100,000 euros each) should share the reduction of 30,500 euros, or 7,625 euros each. They should therefore be taxed on the difference between the two, i.e. 92,375 euros.

However, as you indicate, if your beneficiaries are your father, mother or children, they will also benefit from a personal allowance of 100,000 euros, which will therefore cover these “remaining” 92,375 euros. On the other hand, if the beneficiaries are outside your immediate family (partner, friend, grandchildren whose parents are still alive, etc.), the personal reduction will only be 1,594 euros after that conferred by the insurance life. Your four beneficiaries will then have to pay inheritance tax on the sum of 90,781 euros (92,375 – 1,594).

Hence your question: can each of its beneficiaries benefit from the reduction of 30,500 euros by multiplying the contracts? The answer is unfortunately no: “The reduction of 30,500 euros on sums paid after age 70 applies to all beneficiaries and all contracts”agrees Jérôme Jabaud. As you can see Patrice, taking out several contracts will have little benefit here.

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