Angel, reader Capitalasks us the following question: “Hello, I am 68 years old. What interest would I have in taking out life insurance denominated on a fund in euros (excluding units of account) before I turn 70, knowing that my wife is my sole legatee? This investment seems risky to me to the extent that I would have to partially withdraw these invested funds to carry out work before the expiration of 8 years. THANKS.”
Hello Ange, and thank you for your question. It allows us to take stock of two essential points: the taxation of life insurance before the age of 70, and its usefulness when you wish to pass it on to your spouse.
Life insurance before age 70: a tax advantage… except between spouses
Taking out life insurance before age 70 allows, in principle, to benefit from a tax regime that is particularly favorable to transfer: each designated beneficiary benefits from a reduction of 152,500 euros on the capital transferred (premiums and interest), then a 20% tax up to 852,500 euros. But in your situation, this advantage does not apply: your wife, as the surviving spouse, is completely exempt from inheritance tax, whether it concerns sums from life insurance or the rest of your financial and real estate assets.
In other words, opening life insurance before age 70 has no particular tax benefit if your wife remains your sole beneficiary. This type of contract makes more sense when it comes to passing on to other relatives (children, grandchildren, nephews, etc.). They can benefit from the reduction of 152,500 euros, much higher than their “classic” reduction which they benefit from excluding life insurance. For this reason, taking out life insurance may be relevant if, you never know, you would like to add a beneficiary from here to your distant estate. The beneficiary clause can in fact be modified at any time.
In addition, it is a versatile savings product, which can allow you to finance a large number of projects, including in the short term. You mention the eight-year deadline, but nothing prevents you from withdrawing part of your capital before this deadline to finance work. You retain the possibility of recovering your capital at any time, without penalty. On the other hand, in this case you will be taxed on the winnings withdrawn at 30% (single lump sum deduction – PFU -, or flat tax).
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