What are the stakes of the beneficiary clause in an international context?

Because the wording of the beneficiary clause is of capital importance in a life insurance contract, it must be all the more appropriate when it applies to a mobile and international clientele. Julien Milinkiewicz, Wealth Engineer at WEALINS, details the main issues.

What assumptions are taken into account here?

Julien Milinkiewicz: We know the full importance of the beneficiary clause in life insurance: under the rules of stipulation for others, the deceased capital is paid on the death of the insured to one or more defined. As a reminder, from a civil point of view, the capital is transmitted “outside the estate”, it is neither subject to the return nor to reduction for breach of the hereditary reserve; except first exaggerated manifestations. From a tax point of view, the capital is subject to an advantageous tax system. It is therefore essential that any ambiguity be removed in the identification of the beneficiaries at the end of the contract.

Julien Milinkiewicz, Wealth Engineer at WEALINS
Julien Milinkiewicz, Wealth Engineer at WEALINS © WEALINS

But we also know that wealthy clients are increasingly mobile internationally: a client with +€10 million in wealth changes on average 3X jurisdictions during their lifetime.

As long as the subscriber and/or the beneficiary can relocate after a beneficiary clause has been drafted. For example, a Frenchman with a life insurance policy who leaves to settle in Belgium and dies there while his children remain domiciled in France; or a French subscriber whose children, beneficiaries, parent in the United States to pursue studies and work there.

The beneficiary clause will therefore have to be adapted, this is also the portability of the insurance contract opened in Luxembourg.

For example, what precaution should be taken when drafting the beneficiary clause?

Julien Milinkiewicz: In an international context, pay attention to the clause designating “my heirs: the term heir is a notion of inheritance law, the heir is designated by the law applicable to the succession. If the subscriber leaves France and dies in a foreign state, the law applicable to the succession may be the law of that state and not French law.

Example: the policyholder has designated “his beneficiary heirs”, then he moves to Morocco where he dies. By application of the Moroccan successor law, if it is applicable to the succession, the heirs will be the son and the daughter. But the latter will only inherit a third, her brother the remaining two thirds.

The subscriber’s intentions are therefore foiled by the non-adaptation of the clause during the relocation. In our case, it will suffice to designate before departure “my heirs as defined in application of French successor law. »

And at the level of taxation on the death of the insured?

Julien Milinkiewicz: Care should be taken when relocating to a country that has signed a tax treaty on inheritance: the taxation specific to insurance provided for in art. 990 I of the CGI is never dealt with in the Conventions. There may therefore be a risk of double taxation if the country of the deceased provides for inheritance tax.

Example: the subscriber of a life insurance contract for the benefit of his children who live in France leaves to settle in Belgium and dies there several years later. As the succession opens in Belgium by application of the Convention (place of residence of the deceased), the death benefit will be taxable there but the Convention does not cover the taxation of life insurance, the beneficiaries will be taxed a second time in France at 990 I CGI art title.

Our solution: modify the clause by designating “the heirs” in order to exclude the sui generis levy and thus be taxable only in Belgium.

In partnership with WEALINS

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