Life insurance contracts are at the heart of long-term wealth strategies because they are both investment, tax optimization and transmission tools. Mais des revirements de legislation can in fact damage these installations. The lighting of Sophie Nouy, director of the heritage expertise at Cyrus Conseil.
Life insurance is regularly the subject of fundamental reforms that make its use complicated for both individuals and professionals.
Life insurance, an unstable regulatory framework
The tax regime that applies in the latter case is dependent on the taxation in force at the time of the death of the interested party, in addition to the date of subscription to the contract, the date of payments and the age of the insured at the time of payments. Retirement taxation varies as much or as much as possible, reforming already numerous, dense and specific rules. There is thus a political risk of changing the rules. The effects of this instability are, however, mitigated on redemptions through the operation of life insurance itself: in the case of partial redemption, only the share of the redemption interest is considered taxable income. The tax base is therefore smaller than retired cash, which dilutes taxation.
In terms of transmission, in general, when it is like a rule established for this type of contract. As soon as it has been fed before the 70 years of the insured, the capital of the contract is transferred to the chosen beneficiary, who benefits from a high deduction (152,500 euros), cumulating with that applicable to inheritances. The balance is then taxed at 20% to 31.25% regardless of the relationship, a rate that is necessarily attractive because the succession tax reaches 45% between parent and child and up to 60% in the most expensive cases! However, it is in fact impossible to accurately determine the taxation that will actually be applicable in the contract. Especially if the insured is young and dies fifteen years later, or even more …
The election period we are going through is thus a source of legal investigations for individuals. The taxation of individuals is at the heart of political programs, as has been the case for capital gains taxation for twenty years, which has seen seven major changes during President Hollande’s term alone. Hence an increase in the number of small holdings, formed for the sole purpose of obtaining stability. Indeed, reforms are more focused on individuals and less on businesses.
Diversify detention envelopes
It is therefore understood that life insurance should not be over-allocated by its policyholders. Holders of life insurance contracts are invited to manage the risk by taking out other products in parallel.
One can cite capitalization contracts in this way. This envelope offers the same benefits for insurance during the break-in phase and offsets the seemingly higher taxation for the transmission of undeniable facilities. It is possible, for example, to make donations, in bare ownership or in full ownership, during one’s lifetime to control taxation, and even the limiter. This has the additional effect of purging unrealized capital gainsand the donor can take charge of the rights himself without this being considered a supplementary donation.
Look for products, not the regulatory framework is more stable, you have to combine with the choice of products plus risks, to give up some of the potential for profitability. In this case, it is useful to ask yourself the question of taking out a capitalization contract rather than a life insurance contract, or in addition, to house the possible capital gain. The force of habit and bare commercial pressure are necessarily good advisers.
On the contrary : compares investment solutions, diversifies its assets both in terms of holding envelopes, signature and asset classes is relevant for long-term investment.
You favor placement optics over the goal of tax optimization
The tax benefits attached to an investment can be caused by regulations at any time. Hence the complex layers of taxation that apply in particular to life insurance. That’s why it’s always risky to put in place strategies focused on tax optimization.
A common sense approach is to select investments and then consider optimizing their taxation: a low or no taxed investment can be faced directly, an investment subject to several successive withdrawals will have to be made through an appropriate envelope or through a holding company . It is by decoding the opportunities of the current regulations and by diversifying the envelopes, the issuers, the tax regimes … for which a balanced patrimony is built.
Life insurance is often seen as a must-have for traditional investments, and is the first savings product in France. But fiscal instability faces unrecognized risks for policyholders and beneficiaries of contracts, especially for the youngest. There is no martingale!
 In the case of a bare-property donation, the latent capital gain is purged only on the transferred right – the bare-property – but remains taxable on the usufruct.