Life insurance has for some time been the preferred investment of the French. Very popular, this placement can offer many advantages to the subscriber. At the time of the succession the contract offers considerable tax interest. However, it is not subject to the rules of the Civil Code in matters of succession, but to the Insurance Code. So what does that mean?
The general rules concerning succession under French law
French estate law is proving to be a complex matter and subject to numerous disputes. The litigation is cumbersome, the disputes are important and, in many cases, last for many years.
Nevertheless, there are simple and intangible rules that everyone, whether he who bequeaths or he who inherits, must know and respect.
One of these fundamental principles is the prohibition of exhérédation: in French law one can not “disinherit” an heir. This is reflected in the texts by the principles of the hereditary reserve and the available quota.
Article 912 of the Civil Code stipulates that “The hereditary reserve is the portion of the estate and succession rights, the law of which ensures the free transfer of burdens to certain heirs who are called in reserve, if they are called to the succession, Accept. The portion available is the portion of the estate and inheritance rights that is not reserved by law and of which the deceased has been able to dispose freely by donations.
Hence it must be understood that no heir can be excluded from the succession concerning his hereditary reserve, the legatee can only dispose of the available quota. The latter is ultimately the part which he can freely dispose of by gift or will to a third party or another heir.
Thus, there are very few cases in which a legatee may remove a child from the estate (for example, when the heir has been convicted of the murder of his parent).
Note that the calculation of the hereditary reserve and the available quota is foreseen in the texts, get closer to a notary who can enlighten you on the calculation methods that make it possible to determine them. It is the latter who, when the succession is wound up, will ensure that these rules are respected. They will always ensure that the heirs obtain this hereditary reserve, whatever the wishes expressed by the deceased in his will.
Hence the principle is simple: one can not disinherit (completely) an heir. The control of the rule is strict and a priori each must comply, the donations made by encroaching on the reserve can be reduced to the reserve by the judge.
Life and Inheritance Insurance
Parallel to this testamentary way there is the beneficial way that does not correspond to the Civil code but to the code of the insurances. It is indeed life insurance.
On reading articles L 132-12 and L 132-13 of the Insurance Code, it is found that the sums paid to a beneficiary by this mechanism are non-succession. The latter are therefore neither reportable nor reducible.
In practice, this means that these sums will not be counted in the basis of the mass of the estate from which the notary will calculate the hereditary reserve and the available quota.
Thus if “The stipulated capital or annuity payable on the death of the insured to a specified beneficiary or to his heirs do not form part of the estate of the insured”, for many life insurance would be, beyond (Particularly since the end of the Bacquet doctrine), a means of getting capital out of the estate, which would come to the beneficiary at the time of the termination of the contract, since “the capital or the annuity payable on the death of the Contracting party to a specified beneficiary shall not be subject to the rules of the succession report or to the reduction for infringement of the reserve of the heirs of the contractor “.
This beneficiary could be a reserve heir or a third party, but would have the advantage of seeing these sums out of the estate assets and thus not subject to the control of the hereditary reserve, and thus to the sharing among all the heirs.
The limits to this derogatory character
There are, however, limits to the breach of this principle of the hereditary reserve, without which it would be too easy to override its obligations.
- First of all, the notion of a premium manifestly exaggerated. The latter is assessed in the light of the subscriber’s contributory powers. The law does not specify how these are defined but the judges have pronounced on the subject. This manifest exaggeration will therefore be assessed in the light of three factors: the age, the patrimonial and family situations of the subscriber and the usefulness of the contract for the latter. Judges will focus primarily on the test of utility of the contract, was it a contract for a long-term investment consistent with the nature of the life insurance contract, or was it a short-term investment To remove an asset at the estate base. The sanction will be the reinstatement of exaggerated premiums in the estate of the insured.
- The other notion used by judges to enforce the principle of hereditary reserve is that of indirect donation when the life insurance contract is concluded late and in a total absence of hazard (the insured is dying and close Of death). In this case, the life insurance contract may be requalified as an indirect donation and therefore subject to the respect of the hereditary reserve.
There is, therefore, a certain tax advantage at the time of the succession which can be derived from the underwriting of life insurance by the insured. Nevertheless, be careful to respect the rules of succession, at the risk of seeing the life insurance contract requalified and reinstated to the succession.
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