Assurance-Vie and Inheritance in France

Why assurance-vie sits outside the estate

Assurance-vie is the single most powerful succession tool in France because the capital it pays out on death does not, in principle, belong to the estate at all. The sum or annuity payable on the death of the policyholder to a named beneficiary "does not form part of the succession of the insured" (Article L132-12 of the Insurance Code), and those sums escape both the rules on bringing gifts back into account (rapport à succession) and the rules that cut back gifts encroaching on the reserved portion of the heirs (réduction) (Article L132-13). The premiums the policyholder paid are treated the same way. This is why a properly designed policy can pass a large capital to a chosen person outside the ordinary machinery of French inheritance.

The mechanism behind this is the stipulation for the benefit of a third party (stipulation pour autrui). The beneficiary acquires a personal right against the insurer that arises from the contract itself, not from the estate, so the capital never transits through the deceased's patrimony. That has two consequences a foreign owner should hold onto. First, the capital is not shared out among the heirs according to the reserve; the beneficiary named in the clause takes it. Second, because it sits outside the estate, it is not taxed under ordinary inheritance duty — it has its own tax regime, which turns on the age of the insured when each premium was paid.

The manifestly excessive premiums exception

The exclusion from the estate is not absolute. The rules on collation and reduction do apply where the premiums were "manifestly excessive having regard to the policyholder's means" (Article L132-13, paragraph 2, of the Insurance Code). Heirs who feel their reserve has been drained have two routes: they can argue that the premiums were manifestly excessive and have them brought back into the estate, or they can argue that the policy, showing no genuine element of chance but instead an irrevocable intention to give, is in truth an indirect gift (donation indirecte) that must be added back to the assets for the reserve calculation.

Whether premiums are excessive is judged at the date each premium was paid, in the light of the policyholder's age, their financial and family circumstances, and the usefulness of the contract to them (Cass. civ. 16 June 2022, no. 20-20544). A payment that leaves a modest pensioner without the means to live has been treated as excessive; a large premium that represents only part of a comfortable estate and does not disturb the policyholder's standard of living has not. The lesson for anyone funding a French policy is to spread premiums over time, keep them proportionate to income and overall wealth, and avoid a single late payment that swallows most of the patrimony. Where the policy is requalified as an indirect gift, the whole capital — not merely the premiums — becomes reportable and reducible.

The two tax regimes: premiums before and after 70

Assurance-vie is not tax-free, but it is taxed on its own terms rather than as an ordinary inheritance. Which regime applies turns on one fact above all: the age of the insured when each premium was paid. Premiums paid before the insured's seventieth birthday fall under the sui generis levy of Article 990 I of the General Tax Code; premiums paid after that birthday fall under inheritance duty with the special allowance of Article 757 B. A single contract can therefore carry two tax layers if it was funded on both sides of that birthday.

Two dates set the frame. Inheritance duty applies to premiums paid after 70 only for contracts taken out since 20 November 1991; older contracts sit outside that charge whatever the insured's age. The 20% / 31.25% levy applies to sums corresponding to premiums paid since 13 October 1998, whatever the date the contract was opened, except the premiums already taxed as an inheritance under the after-70 rule. What matters for the tax treatment is the age of the insured when the money went in and, where inheritance duty applies, the relationship between the insured and the beneficiary (Article 757 B).

It is worth being precise about what each regime reaches. Under Article 990 I, the taxable base is the whole capital paid — premiums plus investment growth — before applying the per-beneficiary allowance. Under Article 757 B, only the premiums paid after 70 enter the base; the investment growth attached to the contract is fully exempt, even the growth on the post-70 premiums. So the after-70 regime, while it uses ordinary inheritance rates, only ever taxes the capital the policyholder put in above €30,500, never the returns it earned. The sections that follow take each regime in turn.

The €152,500 allowance and the 20% / 31.25% levy

For premiums paid before the insured turned 70, the capital passes under Article 990 I of the General Tax Code. The taxable base is the sum paid to the beneficiary — the premiums and the acquired growth together — and against that base each beneficiary has a personal allowance of €152,500. A levy of 20% then applies to the excess, rising to 31.25% on the part of each beneficiary's taxable share above €700,000. This is not inheritance duty; it is a levy of its own kind (prélèvement sui generis) that does not depend on how the beneficiary is related to the insured.

The €152,500 allowance is powerful because it is granted per beneficiary, taking all of that assured's contracts together. Name three children as beneficiaries and, across every policy on the same insured's life, each of them has their own €152,500 before any levy applies. The allowance covers what is paid both by insurers and by the Caisse des dépôts et consignations on the death of the same insured to the same beneficiary. This per-head structure is what makes assurance-vie such an efficient way to pass capital to several people, and it stands in sharp contrast to the after-70 regime, whose allowance is a single global figure.

The spouse and the PACS partner pay nothing. A surviving spouse, a partner bound to the deceased by a civil partnership (PACS), and — where they meet the conditions — brothers and sisters exempt from inheritance duty are not subject to the levy at all (Article 990 I, referring to Articles 796-0 bis and 796-0 ter of the General Tax Code). A spouse or PACS partner named as beneficiary receives the capital entirely free of this charge, whatever its size and whether the premiums were paid before or after 70. For couples, this is the decisive point: naming the survivor as beneficiary passes the capital to them tax-free.

How the levy is worked out

Take a beneficiary who is not exempt and who receives €400,000 from premiums paid before the insured turned 70. The first €152,500 is free; the remaining €247,500 attracts the 20% levy, giving €49,500. Because the taxable share stays below €700,000, the higher 31.25% band never applies. Any social levies (prélèvements sociaux) settled on the growth at death come off the base before the 20% or 31.25% is applied (Article 990 I). Where the same contract also holds premiums paid after 70, those are peeled off first and taxed under the separate after-70 regime, so the two allowances and the two rate structures never overlap on the same euro.

One point often misunderstood by non-residents: the levy can reach a policy taken out abroad. Where a policy was taken out by a non-resident, the beneficiary is subject to the Article 990 I levy if the beneficiary is tax-resident in France at the insured's death and has been so for at least six of the ten years before it, or if the insured was tax-resident in France at death (Article 990 I; official tax guidance BOFiP-TCAS-AUT-60). The residence of the policyholder when the contract was opened, and the beneficiary's residence when the money is paid, are irrelevant to that test.

The €30,500 rule for premiums paid after 70

Premiums paid after the insured's seventieth birthday follow a different and less generous path. They are subject to ordinary inheritance duty (droits de succession) under Article 757 B of the General Tax Code, but only after a single allowance of €30,500 — and, crucially, only the premiums are taxed, never the investment growth. The rate and the personal allowance that then apply are those set by the beneficiary's relationship to the insured, exactly as for any inheritance.

The €30,500 allowance behaves very differently from the €152,500. It is global: a single €30,500 shared across every beneficiary and every contract on the same insured's life, however many there are (Article 757 B). It is not a per-head allowance. Where there are several beneficiaries, the €30,500 is divided between them in proportion to the capital each receives, and — importantly — the share going to a beneficiary who is exempt from inheritance duty, such as the spouse or PACS partner, is left out of that division, so the taxable beneficiaries share the whole allowance between them.

What enters the base is only the premiums paid after the seventieth birthday, taken at their gross amount before entry or management charges. Everything else is excluded: premiums paid before 70 (which stay under the Article 990 I regime), and all the growth on the contract — interest, participations and bonuses — including the growth attributable to the post-70 premiums. Above the €30,500, the premiums are taxed on the ordinary inheritance scale according to the family link, but they do not swell the estate itself: they cannot be reduced by the estate's liabilities and do not increase the 5% furniture allowance base. The taxable premiums may, however, benefit from any unused portion of the beneficiary's ordinary inheritance allowance.

Why the after-70 regime is often still worth it

The after-70 regime looks harsher, but two features soften it. First, because only the premiums are taxed and the growth is exempt, a contract funded at 72 that then grows substantially can still pass most of its value tax-free — the gain is never taxed. Second, the spouse and PACS partner remain fully exempt from inheritance duty, so naming the survivor keeps the after-70 capital tax-free just as it does under Article 990 I. Even for children, the €30,500 sits on top of the €100,000 ordinary inheritance allowance that already applies between parent and child, so modest post-70 funding can pass without duty. The decision to keep funding a policy after 70 is a calculation, not a rule of thumb, and it is worth running before the premium is paid rather than discovering the cost after death.

Drafting the beneficiary clause

The beneficiary clause (clause bénéficiaire) is the whole point of the contract, and it is where most avoidable problems are made. Only a valid designation of a beneficiary secures the favourable tax regimes of Articles 757 B and 990 I; where a policy is taken out with no beneficiary designated, or the designation lapses or names someone who cannot be identified or has died, the capital falls back into the policyholder's estate and is taxed as an ordinary inheritance (Article L132-11 of the Insurance Code). A careful clause is not a formality — it is what keeps the capital outside the estate and inside the favourable regime.

There are two ways to name a beneficiary. A qualitative designation uses an impersonal formula — "my spouse, failing that my children born or to be born, failing that my heirs" — and is valid provided the people are defined precisely enough to be identified when the capital falls due (Article L132-8 of the Insurance Code). A nominative designation names the beneficiary by name. Naming by quality has the advantage of following changes in the family automatically: a policy for "my spouse" benefits whoever holds that status at death, not the person married at the time of signing. But it can also mislead — the status of spouse or partner is not permanent — and it slows payment, because the insurer must wait for the notaire's certificate of who qualifies. Naming a beneficiary by name lets the insurer pay quickly against an identity document, but it requires the clause to be reviewed whenever the family changes, on pain of the capital falling back into the estate if the sole named beneficiary has died.

Successive-rank and representation clauses

Two drafting moves prevent the most common failures. First, name beneficiaries of successive ranks — a first beneficiary and then a second, and so on — so that if the first has died before the policyholder and nothing has been done, the capital does not simply fall back into the estate (Article L132-8). Second, if you want a predeceased beneficiary's share to pass to that person's own children, you must say so with a representation clause, because the succession rule of representation does not operate automatically in an assurance-vie. A typical form provides that the beneficiaries are the insured's children in equal shares, and that if one of them predeceases for any reason, that child's share passes to their own heirs in equal shares. Where several first-rank beneficiaries are named without stated shares, the capital is divided equally between them (Article L132-8), so shares should be fixed expressly if equal division is not intended.

The clause can live in the policy itself, in a separate deed lodged with the insurer, in a safe, or with a notaire, and it can be made by will. Lodging a clause with a notaire, and registering its existence in the central register of wills (fichier des dernières volontés), ensures that the designation surfaces at death and can be revised without disturbing the will. It is wise to keep the beneficiary clause separate from testamentary dispositions: a clause that is entangled with a will has been held to draw the capital back into the taxable estate. Finding a policy after death is aided by the national register of life-assurance contracts (FICOVIE), which lists policies held in France and abroad by French taxpayers and which the notaire is obliged to consult; unclaimed sums transferred to the Caisse des dépôts can be searched free of charge on the public Ciclade service.

Dismembering the beneficiary clause

A dismembered beneficiary clause (clause bénéficiaire démembrée) splits the death capital between a beneficiary in usufruct and one or more beneficiaries in bare ownership, so that two sets of people are protected in turn. Typically the survivor — a spouse or partner — takes the usufruct of the capital while the children take the bare ownership. It is the standard way to give a survivor the use and income of the capital for life while preserving the underlying value for the children, and it works in blended families too, letting a policyholder provide for a new partner without disinheriting the children of an earlier union.

Because the object is usually a sum of money, the usufruct is in practice a quasi-usufruct (quasi-usufruit): the surviving usufructuary can use the capital freely, and the bare owners hold a claim (créance de restitution) for an equivalent sum against the usufructuary's estate when the usufruct ends (Article 587 of the Civil Code). The clause can instead exclude the quasi-usufruct and require the capital to be paid onto a dismembered account or reinvested, so the bare owners' position is better secured. When the usufructuary later dies, the usufruct and the bare ownership reunite in the bare owners' hands free of inheritance duty (Article 1133 of the General Tax Code), which is the second tax advantage of the structure.

How the tax is shared on the Article 669 scale

On the death that triggers the contract, the usufructuary and the bare owners are each treated as beneficiaries in proportion to their respective rights, and that split is fixed by the tax scale of Article 669 of the General Tax Code (Articles 757 B and 990 I; official guidance BOFiP-ENR-DMTG). Article 669 values a lifetime usufruct as a percentage of the full value that depends on the usufructuary's age when the contract falls due — the older the usufructuary, the smaller the usufruct and the larger the bare ownership. The scale, reset on 1 January 2004, is applied mechanically: for a usufructuary in the 61-to-70 age band, for example, the usufruct is valued at 40% and the bare ownership at 60% of the capital.

The allowance follows the same proportion. Under the after-70 regime, the €30,500 allowance is divided between usufructuary and bare owner on the Article 669 scale; and where the usufructuary is an exempt spouse or PACS partner, the bare owner takes the benefit of the whole allowance. Under the Article 990 I regime, one full €152,500 allowance is shared between each usufructuary/bare-owner pair in proportion to their Article 669 rights — so a spouse-usufructuary and two children as bare owners share, per child, one allowance apportioned by the scale. The arithmetic rewards planning: the age of the usufructuary at death, the choice between quasi-usufruct and a secured usufruct, and the number of bare owners all change the tax, and all can be set in the clause in advance.

Declaring a foreign policy

A French tax resident may hold a life-assurance policy taken out with an insurer established outside France, but it must be declared. Residents must report, on a note attached to their income-tax return, the policies or investments held abroad — their references, the effective date and term, the premium payments and repayments made during the previous year, and, where relevant, the surrender value or the guaranteed capital at 1 January of the year of the return (Article 1649 AA of the General Tax Code). The declaration covers each foreign policy taken out, modified or wound up during the year by the taxpayer or a member of their tax household, and box 8 UU on the income-tax form (form 2042) must also be ticked.

The penalties for failing to declare are deliberately dissuasive. The fine is €1,500 per year and per undeclared policy where the contract was taken out in a State bound to France by a convention giving access to banking information; where there is no such convention, the fine is €10,000 (Article 1736, IV, and Article 1766 of the General Tax Code). The Constitutional Council has held that these fixed amounts are compatible with the principles of proportionality and individualisation of penalties (decision no. 2015-481 QPC of 17 September 2015). And if the total value of the undeclared policy or policies is €50,000 or more at 31 December of the year for which the declaration was due, the fine is 5% of the value of each undeclared contract, with a floor of the €1,500 or €10,000 figure. These fines are due as soon as the policy has been "used" in the year — a subscription, a surrender, any other operation, or even a mere management-charge entry.

Two practical points round this out. First, the same policy that must be declared for income tax is also within the reach of FICOVIE where the taxpayer is French, so a foreign policy is not invisible to the French authorities. Second, holding a policy abroad does not by itself change the succession tax at death: a beneficiary who is tax-resident in France under the six-of-ten-years test, or whose insured died tax-resident in France, is taxed under Article 990 I or Article 757 B in the ordinary way, wherever the contract sits. The right course for a resident with a foreign policy is to declare it every year and to plan the succession side deliberately rather than assume the contract's foreign situs takes it out of French tax.

Frequently asked questions about assurance-vie and inheritance in France

Is assurance-vie tax-free in France?

Not entirely, but it is taxed on favourable terms of its own rather than as an ordinary inheritance. The capital sits outside the estate (Article L132-12 of the Insurance Code), and premiums paid before the insured turned 70 carry a €152,500 allowance per beneficiary before a 20% (then 31.25%) levy (Article 990 I of the General Tax Code). A surviving spouse or PACS partner named as beneficiary pays nothing at all (Articles 796-0 bis and 990 I).

What is the €152,500 allowance?

It is the allowance that applies to sums from premiums paid before the insured's seventieth birthday, under Article 990 I of the General Tax Code. It is granted to each beneficiary, taking all of that insured's contracts together, so several beneficiaries each get their own €152,500. Above it, a levy of 20% applies, rising to 31.25% on each beneficiary's taxable share over €700,000.

How are premiums after 70 taxed?

Premiums paid after the insured turned 70, on contracts taken out since 20 November 1991, are subject to ordinary inheritance duty under Article 757 B of the General Tax Code, but only after a single €30,500 allowance shared across all beneficiaries and contracts. Only the premiums are taxed — the investment growth is fully exempt — and the rate is set by the beneficiary's relationship to the insured. A spouse or PACS partner remains exempt from inheritance duty.

Does assurance-vie avoid forced heirship?

Usually, yes. Because the capital is outside the estate, it escapes the rules on bringing gifts back into account and on cutting back gifts that breach the children's reserved portion (Articles L132-12 and L132-13 of the Insurance Code). The exception is where the premiums were "manifestly excessive" having regard to the policyholder's means, judged at the date of each payment (Article L132-13, paragraph 2; Cass. civ. 16 June 2022, no. 20-20544), or where the policy is requalified as an indirect gift for lack of any element of chance — in which case the sums are brought back for the reserve.

Do I declare a foreign life policy?

Yes. A French tax resident must declare each foreign life-assurance policy on a note attached to the income-tax return and tick box 8 UU on form 2042 (Article 1649 AA of the General Tax Code). Failing to declare attracts a fine of €1,500 per year and per policy (€10,000 where the State has no information-sharing convention with France), rising to 5% of the value of each undeclared contract where the total reaches €50,000 (Articles 1736, IV, and 1766).

Is my spouse taxed on the assurance-vie capital?

No. A surviving spouse, and a partner bound by a PACS, are exempt both from the Article 990 I levy and from inheritance duty on assurance-vie, whether the premiums were paid before or after 70 (Articles 796-0 bis and 990 I of the General Tax Code). Naming the survivor as beneficiary passes the capital to them free of French assurance-vie tax.

What is a dismembered beneficiary clause?

It is a clause that splits the death capital between a usufructuary — often the surviving spouse or partner — and bare owners, usually the children (Article 587 of the Civil Code for the quasi-usufruct). The tax is shared between them on the Article 669 scale according to the usufructuary's age, and when the usufructuary later dies the usufruct and bare ownership reunite free of inheritance duty (Article 1133 of the General Tax Code).

How our French lawyers help with assurance-vie and inheritance

Assurance-vie is where the largest sums pass, and where the smallest drafting error costs the most — a lapsed clause that pulls the capital back into the estate, a late premium that is later attacked as excessive, or a foreign policy left undeclared. We advise policyholders, spouses and beneficiaries on how the €152,500 and €30,500 regimes apply to their contracts, on drafting and dismembering the beneficiary clause so the right people are protected in the right order, and on declaring and structuring a foreign policy held by a French resident — before the premium is paid and the clause is signed, not after the death.

This article is for general information only. It does not constitute legal advice and does not create a lawyer-client relationship. How assurance-vie is taxed and how a beneficiary clause operates depend on the age at which premiums were paid, the beneficiaries, the contract and any foreign element. Contact our French lawyers for advice on your situation before acting.