Life insurance : and if the tax authorities are you flying ?

redemptions on contracts for the fed after the age of 70 suffer a tax treatment for the least surprising. Bercy seems to be creaming the butter and the butter's money. Explanations.

life insurance is known for its attractive tax regime, in particular in the case of transmission. An exception to this, however. It applies to contracts entered into since 20 November 1991 and powered after the age of 70. In this case, only the gains are tax free, the premiums paid (the capital) being submitted to the estate tax after an abatement of 30 500 euros, all beneficiaries combined. One enters the domain of the stranger, when redemptions take place, such as was able to find a client of Francis Nocaudie, broker-based Tours, which began proceedings against the tax authorities.

Quirk on redemptions

In fact, when the contract holder makes a buyout on his contract, the amount withdrawn is considered partly as capital gains and, according to the pro-rata basis in the contract. The owner is possibly liable to pay tax on his winnings if it exceeds the relief provided. In contrast, after his death, the speech from the Treasury completely changes !

Vis-à-vis the beneficiary, the amounts which have been withdrawn are considered to be gains to 100 %, not from begin the capital (taxable) if the amount received by the beneficiary is less than the premiums paid. In other words, the tax authorities did not yet dare to claim the tax on amounts that are not affected.

Your support is essential. Subscribe for $ 1 support Us

Two weights and two measures

This interpretation of the law leads to quite grotesque situations. Let's take an example.

Past 70 years, Mrs. Jeannine has placed 50,000 euros which have fruited for a similar amount. It is now at the head of 100 000 euros. She needs to recover half of this amount. At his death his beneficiaries to recover so the 50 000 euros remaining.

Case 1 : Mrs. Jeannine has a single contract : the administration considers that the sums redeemed will be blamed fully on the gains of the contract. After the allowance, the beneficiaries are therefore taxed on 50 000-30 500 = 19 500 euros.

Case 2 : Mrs. Jeannine has two contracts : it has redeemed the entirety of the first contract, the second is transmitted. The tax authorities considered that the half of the amounts corresponding to gains, exempt. The balance of 25 000 euros, is fully covered by the allowance, the beneficiaries are exempt.

Read our complete file

Taxation life insurance

Two types of life insurance are better than one, is it still Necessary to opt for the life insurance? Life insurance: how to take advantage of the new tax?

Two instructions, two different interpretations

The problem is that the law is not unclear on the topic. The translation that is made is the tax instruction of 29 may 1992, François Nocaudie judge "unfounded". This indicates that buybacks have no impact on the base of payments. Especially, the expert has identified another statement, more recent, and more beneficial to the taxpayer ! This last, dated September 1, 1994, indicates that where there has been partial withdrawals, "the total premiums paid for a contract refers to those who have not already made a refund to the opportunity of withdrawals prior". A good understander...