Lawmakers pass an amendment changing the tax treatment of life insurance policies
On Thursday, October 17, members of Parliament adopted an amendment aimed at changing the special tax treatment of life insurance policies in the event of a transfer. The text proposes applying the model used for inheritance taxes on direct descendants to policies for which premiums were paid before the age of 70.
Life insurance could be taxed more heavily as part of an estate. On Thursday, October 17, members of the National Assembly adopted an amendment proposed by Jean-Paul Mattei, a representative from the Pyrénées-Atlantiques department (Les Démocrates), according to Capital. The amendment calls for “aligning the taxation of the transfer of life insurance policies, after the deduction, with the model for inheritance taxes in the direct line of descent.”
Currently, payments made before age 70 into a life insurance policy are exempt from inheritance tax up to 152,500 euros. All beneficiaries benefit from this exemption. Above this amount, a 20% tax applies up to 700,000 euros. The rate rises to 31.25% above this threshold.
If payments are made after the age of 70, “inheritance tax is due on the portion of the premiums exceeding 30,500 euros,” according to the Notaires de France website. And in this case, this exemption is divided among all beneficiaries. The inheritance tax schedule varies depending on the degree of kinship between the decedent and the beneficiary.
Congressman Jean-Paul Mattei therefore wishes to address this tax break for heirs in cases where payments are made into the policy before the age of 70. He proposes applying “the same rate as for direct-line inheritances.” The tax schedule would then be completely revised.
After the 152,500-euro deduction, the remaining amount would be taxed at 20% up to 552,324 euros. The rate would then rise to 30% up to 902,838 euros, to 40% up to 1,805,677 euros, and finally to 45% above that amount. For the taxable portion exceeding 1,805,677 euros, the rate would therefore be 45%, compared to the current 31.25%. This amendment is scheduled to be reviewed again and voted on in a public session beginning October 21.
