Assurance Vie has, among its many advantages, very favorable taxation when transferring inheritance. The main rule to follow is to make payments before age 70 to ensure that the inheritance passes to the beneficiaries free of inheritance tax.
To avoid inheritance tax, there is nothing better than taking out an Assurance Vie contract. The key is favorable tax treatment for the beneficiaries named in the contract and a largely tax-protected inheritance. The advantage of this strategy is that the deductions provided for the transfer of inheritance, in particular for direct inheritance (between parents and children) in the amount of 100,000 euros tax-free, can be supplemented by a deduction for Assurance Vie.
Please note, however, that having an Assurance Vie contract does not guarantee that your assets will be tax-free. The tax treatment of your contract varies depending on the date it was signed, as well as your age at the time the premiums were paid.
Old contracts released
Let's imagine that you entered into an Assurance Vie contract before November 20, 1991. If premiums were paid before October 13, 1998, the assets covered by your contract are completely tax-free. For subsequent contributions, each designated beneficiary is given a deduction of €152,500. A tax of 20% applies up to €700,000, the tax rate is 31,25% above this amount.
For contracts opened after November 20, 1991, the tax regime is different. Contributions paid before October 13, 1998 remain tax-exempt as long as the subscriber made payments before his or her 70th birthday.
Pay until age 70
But if the subscriber has exceeded this age limit at the time of payment, inheritance tax will apply to the contract after a total deduction of €30,500, which will be divided among all beneficiaries.
Have you just taken out an Assurance Vie contract? Please note that inheritance tax on payments made after 13 October 1998 may vary significantly depending on your age. For contributions up to age 70, a deduction of €152,500 is provided per beneficiary. Suffice it to say that for a contract worth €300,000, if there are two designated beneficiaries, the inheritance tax will be zero. For any amounts exceeding the deduction, a tax of 20% applies to the first €700,000 and then 31,25% on top of that.
Conversely, premiums paid after age 70, regardless of the beneficiary, in excess of €30,500 are returned to the taxable estate. In this case, all profit under the contract is exempt from tax.
So be careful about contributions after age 70, if the beneficiary of your contract is a third party, then contributions over the deduction amount of €30,500 will fall into the inheritance tax scale, and in this situation the inheritance tax reaches 60%.
The surviving spouse, partner related to the deceased PACS, brother/sister are exempt from paying the tax completely under certain conditions.
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