What is the ceiling of a life insurance?

No bare ceilings really apply to life insurance. On the other hand, there are many thresholds to know. 150,000, 152,500, 30,500, 4,600 euros: these figures are to be kept in mind to optimize the taxation of your life contract. The tour of the horizon.

This is a question that many internet users ask themselves. What is the life insurance ceiling?

In fact, by querying search engines on this topic, savers are probably looking for other information. In fact, life insurance contracts are not subject to any payment ceiling, as is the case for an ELP, an A Booklet or a PEA.

No legal or regulatory limitation applies to us. In theory, you can deposit so much money that you want it to be a living contract (and subscribe as many contracts as you want). Insurance companies may individually impose limits – especially on premiums paid into the fund in euros – but in no case are these ceilings that can be extended to the whole of life insurance.

On the other hand, there are many thresholds that, if exceeded, limit the tax interest of life insurance contracts.

The “ceiling” of 152,500 euros …

The best known, which may correspond to the “ceiling” searched by Internet users when they query Google, is the threshold of 152,500 euros.

This is, in fact, the amount that a subscriber to a life contract can pass on to each of his beneficiaries as a total deductible of inheritance tax. Specifically, if you hold 610,000 euros (four times 152,500), you can transfer, on your death, 152,500 euros to four people without any tax being due (excluding taxation of any capital gains, see below).

The beneficiary or beneficiaries may be the heirs or any other person. In the latter case, however, be careful not to pass on any sums that would harm the hereditary reserve (especially children). The transfer could then be called into question by the court if it considers that the premiums – the money bequeathed via life insurance – are “display”. However, there is no official “ceiling” on this subject. Each case will be considered individually by a judge in the event of a complaint filed by a reserving heir.

… and that of 30,500 euros after 70 years

This threshold of 152,500 euros is reduced to 30,500 euros if the payment was made after 70 years of the insured on a contract opened after November 20, 1991. 30,500 euros to one beneficiary or 15,250 euros to two beneficiaries, etc.).

Beyond the 152,500 euro rebate, the bequeathed capital will be taxed at up to 20% 852,500 euros per beneficiary and then 31.25% (beyond the deduction of 30,500 euros, the capital is taxed on inheritance tax and interest is exempt).

In addition to these “ceilings”, which are essential to optimize your estate, other thresholds apply to life insurance taxation. Specifically, they relate to the taxation of earnings generated by your investments.

The abatements of 4,600 and 9,200 euros

Eight years after its opening, a life contract allows you to benefit from a total tax exemption (social security contributions are still due) on capital gains and dividends up to a limit of 4,600 euros per year (9,200 euros for a couple) . If the earnings do not exceed this amount during a withdrawal (or redemption, in the jargon), no income tax will be payable.

Let’s take an example. You have 100,000 euros of savings invested in a life contract, including 30,000 euros in capital gains and dividends (“gains”), or 30%. You can in this case retire 15,333 euros in tax exemption. The share of gain will amount to 4,599.90 euros (15,333X0.3). To find out what figures, you don’t have to divide the amount of the abattement (4,600 euros or 9,200 euros for a couple) by the part that represents the gains in your contract (here the rate is 30%, or 0.3. / 0.3 = 15.333).

The operation can be repeated every year. It is even worthwhile to commit to implementing it every year if you benefit from significant latent capital gains.

The new “ceiling” of 150,000 euros

Beyond the deduction, gains are taxed at 7.5% (+ 17.2% of social security contributions). For payments made before September 27, 2017, this lump sum levy applies regardless of the amount. For payments made from this date, up to 150,000 euros of payments are not valid. Then the flat tax of 12.8% (30% with social levies) will be levied.

What a new “ceiling” of 150,000 euros is to know and you have recently received important premiums or plan to do so. It should not be confused with the 152,500 euro rebate mentioned above.

Conclusion

In summary, five “ceilings” can be considered to apply to life insurance.

– Three concern the transfer: 152,500 euros, 30,500 euros (after the age of 70) and an amount potentially assessed by the judge if the beneficiaries are not conservative heirs.

– Two concern the imposition of earnings: 4,600 (9,200 euros for a couple) and 150,000 euros for the lyrics made from September 27, 2017.

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