Life insurance: beware of reclassification as a gift

Life insurance: beware of reclassification as a gift

It’s well known. Subscribing to a life insurance contract makes it possible, through the beneficiary clause, to benefit a loved one. But certain rules must imperatively be respected, under penalty of experiencing a serious disappointment. This is precisely the subject of Antoine’s question, who questions the experts of the “Grand rendez-vous de l’épargne” (Capital / Radio Patrimoine) on this subject. Our reader, who wishes to pay the sum of 300,000 euros on life insurance for which he has designated his wife as beneficiary, wonders if in view of his income – limited to 2,000 euros net per month – he does not incur the risk to see this reported amount reclassified as a donation.

In the sequence “It concerns you” of our program, Nathalie Couzigou-Suhas, notary in Paris, is responsible for enlightening it. And begins by recalling a few essential rules for a good understanding of a life insurance contract. “In principle, everything a beneficiary receives under life insurance does not fall within the estate,” she explains. The capital received on the death of the life insurance subscriber is not part of the estate. It escapes the rules, both of the report and of the reductions.” But what are they exactly?

The rule of the relationship to the succession

In summary, everything given during life to an heir must be brought back, that is to say reinstated, to the succession. “It is presumed that it is an advance that you have made and that on your death, the heir will take a little less than the others since what he has previously received will be deducted”, supports Maître Couzigou-Suhas.

Be careful also to respect the rule of hereditary reserve, warns the specialist. Because on the death of the subscriber, what he has given must be reported fictitiously to an estate mass, on which the reserve share of the heirs is calculated. “Imagine that a person leaves a child and has given 300,000 euros to another person, his brother for example, and that, when he dies, only 100,000 euros remain. This makes a total mass of 400,000 euros. As the child should have half of this mass. He will be able to sue the person who received 300,000 euros to receive 100,000 euros from him.

Manifestly exaggerated or risk-free premiums

In the context of life insurance, the sums paid are not subject to the binding rules of the relationship to the estate, under Articles L-132-12 and L-132-13 of the Insurance Code…unless the amount in question is considered excessive. The judge then looks at the subscriber’s income and assets. In the case of Antoine, “it is likely that the judge considers that this payment was manifestly excessive. He can also decide that it is partially returnable”, slice Nathalie Couzigou-Suhas. It should be noted that the income and assets taken into consideration are those observed on the day of payment, and not on the death of the subscriber.

And the notary warns that the risk of requalification does not stop at the sole amount paid for the benefit of the beneficiary: “The judge will look at the absence of risk. If the person did not clearly have an interest in paying, a requalification is possible as a disguised or indirect donation. As in the case of an excessive premium, it will then be reintegrated into the mass divisible between heirs.

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