A transmission is being prepared and optimized: that Yves and Mireille Moreau have understood this well. By opting for the right solutions, Yves and Mireille will be able to pass on up to 400,000 euros, including 150,000 euros after age 70, to each of their two children, without paying any inheritance tax.
Yves has just celebrated his 72 years, and Mireille her 71 years. Both have been married for 40 years, but remain in love as on the first day.
They own a townhouse in the province worth 350,000 euros. Like many French people, Yves and Mireille hold a life insurance contract (250,000 euros each). clever, the Moreaus made all of their payments before their 70th birthday. Passionate about the markets, Yves had also opened a securities account for himself and another for his wife Mireille. Today valued at 300,000 euros eachthe latter have lost a lot since 2008, and Yves no longer follows the markets as assiduously.
Their house has been paid for for a long time, and the Moreaus are enjoying their retirements properly thanks to a comfortable income of 2,000 euros each. Both at 70, they are starting to think about passing on their heritage to their 2 children Pierre and Léa.
The fact of having completed their life insurance contracts before age 70 allows them to benefit from a reduction of 152,500 euros per beneficiary during transmission, which is no longer the case for payments after age 70. They therefore have enough deductions to pass on the contracts without inheritance tax.
With the abatement on their estate of 100,000 euros per child (and per parent)they will be able to pass on their townhouse, or another property without inheritance rights, if they decide to move (Mireille dreams of a beach house in the Basque Country).
But beyond these discountshow will Yves and Mireille be able to pass on to their children the 600,000 euros from securities accountsby minimizing inheritance tax?
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Yves and Mireille will first close their respective securities accounts. They don’t have the time to take care of it anyway, to take risks, and even if they make gains they will be heavily taxed.
They will start by putting each 30,500 euros each in a life insurance contracttaking care to open a new contract so as not to mix the allowances of 152,500 euros with the new allowances for payments after 70 years.
This therefore allows them to each transmit 15,250 euros to each child without inheritance tax. It should also be noted that the gains made on these contracts will also be exempt from inheritance tax.
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Then they will place the balance (539,000 euros) on two capitalization contracts of 269,500 euros.
They will be able to give bare ownership of a contract to each of the two children, with a reserve of quasi-usufruct.
Bare ownership results in owning a property where the owner does not have the enjoyment of the property otherwise called the usufruct. The quasi-usufruct allows more freedom to the usufructuary than a simple usufruct.
We do not touch their main residence: Yves and Mireille have every interest in keeping full ownership of their main residence, in case they wish to sell it, to move for example, or to sell in life. It is therefore better to break up the capitalization contracts.
Given their ages, the bare ownership has a value of 70% of the amount transmitted (i.e. 188,650 euros). Each parent is entitled to a deduction of 100,000 euros on each contract given to a child. Thus, they can transfer the bare ownership of their entire capitalization contract, i.e. 269,500 euros per parent, 134,750 euros for each child, without any inheritance rights while both being over 70 years old.
With the capitalization contract and the life insurance contract after 70 years, Yves and Mireille have thus succeeded in transmitting each 150,000 euros for each of their childrenin addition to the 152,500 euros under life insurance before age 70. That is a total of 302,500 euros for each child.
The allowance of 100,000 euros is renewable every 15 years. Thus, provided they live at least another 15 years, the Moreaus will each be able to benefit from a new allowance of 100,000 euros per child on the transfer of their principal residence, and each transmit a total of 400,000 euros to each child, without them having to pay inheritance tax via life insurance.
Capitalization contracts make it possible to optimize your estate, very often unknown to the general public, they have many advantages. You too do like the Moreaus and optimize your estate thanks to capitalization contracts.
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Any resemblance to a real person is purely coincidental.
The content above does not represent an exhaustive heritage analysis.