In France, all of the deceased’s assets are subject to inheritance tax: bank books, real estate, cars, furniture, etc. Only one investment is treated differently: life insurance. This product is subject to separate taxation and does not have to be processed during the declaration of inheritance. In fact, the beneficiaries of a life insurance contract on death will be able to release the sums quickly without needing anyone. To fully understand the procedures, I invite you to read the taxation on death on life insurance: How is the tax on life insurance on death calculated?
I allow myself a brief reminder so that you can understand how to collect life insurance on death.
If the deceased paid sums on the contract before age 70: each beneficiary pays nothing up to €152,500. For sums that exceed, the tax authorities take 20% (then 31.25% from €700,000).
If the deceased has paid sums after the age of 70: the beneficiaries share a single allowance of €30,500. Beyond that, taxation is that of inheritance rights and then depends on the family relationship. See: Inheritance/gift tax schedule .
How to collect life insurance after death?
The procedure for closing a life insurance contract after death is simple and does not require any fees. The biggest difficulty is this: you have to know that the deceased has taken out life insurance on which you are the beneficiary to recover the money quickly . If you know that there is a life insurance in your name in such a bank or such insurance, the closing will be fast. This is why it is more than advisable to warn the beneficiaries of the existence of his life insurance . I detail the approach for people in this situation first and then we will see the case of beneficiaries who do not have knowledge of life insurance.
a death certificate which proves that the subscriber of the contract is indeed deceased (to be requested from the town hall of the place of the deceased).
On this last point, the proof will depend on the way the beneficiary clause is drafted. Either the life insurance clause includes your name (Mr DUPONT Martin) and in this case an identity card or passport will suffice. Either the clause specifies the rank (spouse, my children etc…) and it must then be proven. This can go through the family record book or through an act of notoriety which specifies your family link with the deceased. In the case of several beneficiaries, each can do the process on his own; it is also possible to group the shipments to settle everything at once.
In the first place, it suffices to inform the establishment which manages the contract that the person is deceased. You have to go there or send a letter with the death certificate.
In the process, you inform the establishment that you are the beneficiary of the life insurance contract. At this stage, the 3 documents mentioned above will be requested by the advisor.
Mr Corrigetonimpot knows that he is the beneficiary of two life insurance contracts from his deceased father. He goes to the notary to have a deed of inheritance proving that he is the son of the deceased. He goes to bank A and bank B to deposit his RIB, the death certificate and the deed of inheritance.
In the following days, the establishment will send you a paper indicating the amount of the sums paid before the age of 70 on the contract. Be aware that the figure contains payments and interest because taxation is based on both.
Mr Corrigetonimpot receives a first proof from bank A indicating that the contract is worth €80,000 and that €80,000 will be taxed according to article 990I (amounts paid before age 70). Bank B provides him with a document stating that there is €90,000 taxed for sums paid before age 70.
The taxes issue the tax clearance.
Once you have these documents, just go to the tax office. The latter will then calculate the taxation according to the scales seen above. The tax authorities will only calculate the tax and issue you a paper called tax discharge which summarizes the amount to be paid. It is mandatory to go through the tax authorities because they will be able to combine life insurance if the beneficiary receives several from different banks.
Mr Corrigetonimpot will first see the tax authorities with the paper from bank A. Remember that the tax is 20% if the sums exceed the abatement of €152,500. The tax authorities note that there are 80,000 € taxed. He issues a first tax clearance for bank A indicating that the tax is €0. The tax authorities also note that Mr. Corrigetonimpot used 80,000 € from his abatement of 152,500 €.
Mr Corrigetonimpot returns to see the tax authorities with the proof of bank B. The taxes note that the sums are paid before 70 years and that there are 90,000 € taxed. They know that there is only €72,500 of allowance left. The tax payable is (90,000 – 72,500) * 20% = €3,500. The tax clearance for bank B is issued indicating that there is €3,500 in taxes to be paid.
The insurer or the bank pays the sums to the beneficiaries and collects the tax.
Then just bring the tax clearance to the bank or insurance. They will take the tax payable on the capital and transfer the rest to you. They will take care of transmitting the tax themselves. This step should not take more than 2 or 3 weeks. If the establishment does not pay the sums within this period, a registered letter is generally sufficient to speed them up because the legislation imposes a strict deadline on them.
Mr Corrigetonimpot goes to bank A with the first tax clearance. The establishment finds that the tax is nil and pays the €80,000 to Mr on his RIB.
Ditto for bank B. It finds that it must deduct €3,500 in taxes. She pays the balance of 90,000 – 3,500 = €86,500 to Mr Corrigetonimpot.
The procedure for closing a life insurance contract of which you are the beneficiary will be almost identical if the sums have been paid after 70 years. You also just need to bring the documents and go to the bank then to the taxes then to the bank to receive your funds. That said, the specific taxation for sums paid after 70 years (deduction of €30,500 then taxation according to inheritance tax) means that there will be two important differences.
1- The act of inheritance necessary to untie the life insurance after 70 years.
If the deceased has paid more than €30,500 after age 70, taxation will then depend on the inheritance tax scale. The rate is not the same for the children as for the brothers/sisters, the partner, the foreigners etc…. The tax authorities will therefore need to know your status as an heir to calculate the tax and establish the tax clearance. It will therefore imperatively be necessary to have a document establishing your relationship with the deceased.
2- You must inform the notary if the allowance of €30,500 is used for certain heirs.
It is a very technical aspect. If the beneficiary is an ascendant (parent…), a descendant (child, grandchild…) or a brother/sister, the tax clearance must also be sent to the notary in charge of the estate. Indeed, sums of life insurance beyond €30,500 are subject to the scale of inheritance tax. If the notary is not aware of these contracts, he will wrongly start from the low slices of the scale and you risk a recovery a few months later. I explained this case in detail here: should the life insurance be declared to the notary? No except in 4 situations.