Life and divorce insurance: effects and beneficiary clause

Life and divorce insurance contract: joint subscription contract

Unlike contracts taken out on an individual basis, joint membership (or joint subscription) contracts are taken out jointly by the two spouses who both have the status of insured. This formula, reserved for married couples under the legal or universal community regime, is hardly used any more, because the tax interest has disappeared.

This advantage no longer exists, the interest of the joint subscription with termination of the contract on the first death is no longer justified, because the contract is supposed to be supplied by the couple’s money, in the event of divorce the value of the contract will be shared in two equal parts, which will often require its closure in order to be able to recover the funds to be shared and therefore the end of the fiscal seniority of the contract (unless a partial redemption by one of the spouses to compensate the other height of his part).

Become individual contracts

The fate of contracts signed individually by each of the spouses depends on the matrimonial regime.

Separation of property

Under the regime of separation of property, each spouse has their own property. Divorce therefore has no impact on the life insurance contracts taken out by one or the other of the spouses. The subscriber of the contract retains the benefit of the contract and all the sums acquired on it.

The legal community

Without a marriage contract, it is the legal regime also called community reduced to acquests that applies. This regime provides that each spouse retains full ownership of the property that belonged to him before the marriage (as well as the sums received by inheritance or donation). On the other hand, articles 1400 et seq. Of the Civil Code provide that all property acquired during marriage is deemed to be the property of both spouses. Therefore, a life insurance contract taken out during the marriage is deemed to have been taken out with mutual funds. In the event of divorce, the subscriber must report to his ex-spouse 50% of the cash value of the contract on the day of the divorce (and not 50% of the sums paid).

This principle of sharing life insurance during divorce does not apply when the premiums paid on the contract come from capital belonging personally to the subscribing spouse, provided that the latter can provide proof thereof. This is why it is advisable for the subscription of this contract that the subscribing spouse keeps track of the origin of the capital employed to carry out the investment. This is generally the case with sums resulting from an inheritance or a donation. In this case, the inclusion in the contract of a re-employment clause is required. This clause attached to the contract, and mentioned in the personal conditions, must stipulate the origin of the equity and be signed by both spouses.

Example of wording of the clause:

“The payment of the sum of (in full)… € made today by Mr. (last name, first names) when subscribing to life insurance policy n °… with the company… was made by way of re-employment ( total or partial) of funds received by Mr. (name, first names) on …, [en sa qualité d’héritier de Monsieur (nom, prénom), son père / OU / suite à la donation consentie le … à son bénéfice par son père, Monsieur (nom, prénoms) …].

Done at… on… (Signature of the 2 spouses) ”

The integral universal community

This regime provides that all of the couple’s past, present and future assets belong entirely to the conjugal community. As soon as the community is liquidated by the effect of divorce, all life insurance contracts, regardless of the holders, must be shared between the two ex-spouses.

Divorce and beneficiary clauses

When signing a contract, the wording of the beneficiary clause must be carefully considered because its wording is sometimes of capital importance in the event of divorce. Imagine, Mr X married to Mrs X for 10 years when he took out his life insurance contract. He wants to leave the benefit to his wife. Two solutions are then available to him:

  • Either it leaves the standard clause provided for by the insurer which is generally similar to the following: “In the event of death, I designate as beneficiary my spouse who is not legally separated; failing this, my children, born or to be born, alive or represented by equal shares between them, failing which my heirs. ”
  • Or, he wishes to specify the identity of his spouse. In this case, the clause becomes: “In the event of death, I designate as beneficiary my spouse Mrs X + first name born Y; failing this, my children, born or to be born, alive or represented by equal shares between them, failing which my heirs. ”

A priori the two clauses designate the same person. However, the first wording should be preferred. Indeed, “my spouse” designates the spouse at the time of the subscriber’s death and not the spouse at the time of subscription. With this formula, if couple X divorce and Mr. X remarried, it is his second wife who will receive the benefit of the contract. Conversely, the use of the formula designating the spouse by name has the disadvantage of requiring modification of the clause in the event of divorce and remarriage of the subscriber. In case of forgetting, it is the ex-wife who remains the beneficiary of the contract.

Good to know : if the gentleman designating Madame as beneficiary agrees to accept the benefit of the contract in the hands of the insurer, you should know that he will henceforth be unable to modify the beneficiary clause, even in the event of divorce.

What to do to avoid problems following divorce?

To avoid the problems associated with divorce, it is possible to take out cross contracts, that is to say that each spouse signs a contract designating his spouse as beneficiary. The ideal is that the two contracts include the same payments. In the event of divorce, each will keep their contract and benefit from their fiscal seniority.

Finally, under all community regimes (legal or universal community), maximum security is provided by the following wording of the beneficiary clause, which excludes the spouse who is legally separated or in the process of divorce, even before the judgment is pronounced: “My spouse, not divorced, not legally separated, not engaged in divorce or legal separation proceedings on the day of my death, failing that… ”