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Succession : Is the notary aware of the life insurance contracts ?

Succession Is the notary aware of the life insurance contracts

The treatment of life insurance during the settlement of an inheritance is an important subject surrounded by a mystery maintained by banks and life insurance companies.
On the one hand, the notary in charge of the succession will explain that he must have knowledge of the life insurance policies taken out by the deceased or by his spouse with whom he was married under a community regime, and on the other hand, the banker and the life insurance company will insist to their client, the subscriber of the life insurance policy, on the non-inheritance character of the life insurance policy.
In the middle, the saver, the spouse who took out the life insurance policy with the common money or the beneficiary of a policy taken out by the deceased, do not know what to do.
Is it necessary to declare the life insurance contracts to the notary? Is the notary already aware of this?
Let’s try to go deeper into this question as we do in our new book “Succession” and in our book “Assurance vie et gestion de patrimoine” (two independent books… but which are naturally complementary).
Distinguish between life insurance contracts for which the deceased was the insured subscriber and life insurance contracts taken out by the spouse of the deceased.
Indeed, the answer is not the same depending on the nature of the life insurance contract: Is it a life insurance contract terminated by the death of its insured subscriber; or is it a life insurance contract not terminated by the present death because it was subscribed by the spouse of the deceased.
The life insurance contract subscribed by the deceased and unwound by his death.
This is the life insurance policy underwritten by the deceased. The death of the insured policyholder results in the unwinding of the life insurance contract outside the estate. The capital saved is then paid to the beneficiaries designated in the beneficiary clause.
The notary may ask the insurer about the existence of the life insurance policies taken out by the deceased and some of their characteristics, subject to the insurer’s confidentiality obligations, which do not allow it to reveal the identity of the beneficiary(ies).
In the event that the life insurance company does not wish to communicate this information to the notary, the notary may also consult the FICOVIE file on behalf of the deceased’s heirs. The FICOVIE file is a centralized file of all the life insurance contracts taken out by a person (see “Should the notary be mandated to consult FICOVIE and request the list of life insurance contracts taken out?)
In short, the notary can be aware of the life insurance contracts taken out by the deceased. But he will only be able to know the names of the beneficiaries after consulting the FICOVIE file and with the mandate of the heirs.
The life insurance company will not communicate the names of the beneficiaries, but the information is available in FICOVIE. FICOVIE contains :
The surrender value as of January 1st of the current year if the contract is greater than 7500€;
The amount of subscriptions, additional payments or redemptions made during the year;
The value of the guaranteed capital;
The amount of premiums paid after the subscriber’s 70th birthday;
The beneficiaries of the said life insurance contract.
Is it serious if the notary is aware of the life insurance contracts unwound by the death of the insured subscriber?
The question then is what difference does it make? Is it serious if the notary knows about the life insurance contracts?
In the vast majority of situations, and mainly when the spouse is designated as the beneficiary of the said life insurance contract subscribed by the deceased or when the life insurance contract was funded with the deceased’s own funds, this revelation will have no consequence on the devolution of the estate.
On the other hand, when :
The life insurance contract was a simple subscription in the name of the deceased;
The life insurance contract was funded with common funds for spouses married under a communist regime;
And that the beneficiary is not the surviving spouse (like the children for example)
So, when these three situations are met (knowing that the first two concern the vast majority of cases), the notary will have to calculate a reward for the surviving spouse (see “Life insurance and reward for the community: when the death gives rise to a reward …)

This reward will reduce the amount of the estate assets in order to increase the spouse’s share of the community assets. Indeed, the deceased used common funds belonging to the couple, to subscribe a life insurance contract in his name, and for the benefit of a person other than the spouse.

The spouse must therefore be compensated for half of the sums paid into the life insurance policy. This is the principle of the reward.

On the other hand, this disclosure of the life insurance policies taken out by the deceased will not call into question the non-successional nature of the unwinding of the life insurance policy. On the other hand, all the heirs will be aware of the life insurance policies taken out by the deceased, their amount and, above all, the names of the beneficiaries.

This revelation will facilitate attempts to recharacterize the life insurance contract as a manifestly exaggerated premium, for example (see “Why is life insurance “outside the estate”? What are the exceptions?)

The insurance code of ethics also specifies that “with regard to the elements communicated [Editor’s note: to the notary by the life insurance company], in particular the amount of the premiums paid, the heirs may, if necessary, by legal means, obtain additional information and assert their rights pursuant to article L.132-13 of the insurance code.

L132-13 of the Insurance Code: “The capital or annuity payable on the death of the contracting party to a specific beneficiary is not subject to the rules governing the ratio to the estate, nor to those governing the reduction for infringement of the heirs’ reserve. These rules do not apply either to the sums paid by the contracting party as premiums, unless they were manifestly exaggerated in view of his means.

The life insurance contract subscribed by the spouse of the deceased and not terminated by his death.
This second category of contract concerns the life insurance contract taken out by the spouse of the deceased married under the community regime.

Once again, the notary will be aware of the life insurance policies taken out by the spouse of the deceased with whom he or she was married under the community regime. It is the life insurance company that will provide him with this information. In this respect, the code of ethics of life insurance companies states:

“The tax authorities, in order to guarantee tax neutrality for all heirs upon the death of one of the spouses, consider that the surrender value of a life insurance policy, taken out with joint funds and not unwound upon the liquidation of a marital community following the death of one of the spouses, is not, for tax purposes, integrated into the assets of the marital community upon its liquidation, regardless of the quality of the designated beneficiaries.

The surrender value therefore does not constitute an element of the estate assets for the calculation of the transfer taxes due by the heirs of the predeceased spouse.

Thus, in the event of a death that does not result in the unwinding of the life insurance policy, the surrender value of the unsettled policy taken out with joint funds is not subject to inheritance tax (see BOI-ENR-DMTG-10-10-20-2020160531). [Note: This is the CIOT ministerial response that we regularly detail and that you can read more about in these articles: Réponse CIOT].

In application of the mandate he has received from the surviving spouse in common property, the notary can ask the insurer about the possible existence of life insurance policies taken out with this insurer by the surviving spouse.

A model letter exchange between notaries and insurers has been developed so that the surviving spouse is clearly informed of the tax administration’s position.

Thus, the notary will be informed by the life insurance company of the life insurance contracts taken out by the deceased spouse.

Is it serious if the notary is aware of the life insurance contracts subscribed by the spouse of the deceased, not unwound by the death of the insured subscriber?
This revelation is not serious, but it will have a significant impact on the settlement of the estate.

The life insurance policy taken out by the deceased married under the community regime and funded with common funds will therefore be considered as an inheritance asset for half:

This life insurance policy taken out by the spouse of the deceased will increase the estate assets that will have to be shared among the heirs (and in particular with the children).
But this allocation to the children will benefit from a tax exemption and will not be taxed at inheritance tax without any ceiling or limit

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