Can a PEA be passed on to one's heirs?

When the holder of a Stock Savings Plan (PEA) dies, the plan is automatically closed. Although the heirs may benefit from an exemption from capital gains tax, they are required to pay social security contributions on transactions made before the holder’s death. This payment must be recorded as a liability in the estate.

The PEA is a preferred option for investing in the stock market because, after holding the securities for five years, it provides a tax exemption on capital gains when European securities are sold, with the exception of social security contributions. These contributions are deducted either when the PEA is closed or when withdrawals are made.

This raises the question of whether the tax benefits of a PEA are passed on to the heirs. Unfortunately, the answer is no, because it is not possible to transfer a PEA. Thus, in the event of death, the PEA is closed, and the securities are transferred to a securities account in the name of the estate.

The heirs then have the choice of keeping the securities or selling them to raise cash. To calculate the estate tax, the value of the securities on the date of death is taken into account. However, there is an exception. Note that it is possible to use the average market price over the 30 days preceding the death to avoid being penalized by a temporary rise in the price of one or more securities.

If the heirs decide to sell the securities during the probate process, they benefit from a capital gains tax write-off. The transfer of the securities into the estate results in the realization of the capital gain that was unrealized in the decedent’s estate. The capital gain will be calculated at the time of the sale of the securities based on their value on the date of death (or the “rolling 30-day rule”). In addition, it is possible to take into account the estate tax on the securities to reduce the amount of the capital gain.

If the heirs choose to keep the securities, they will be transferred to a joint securities account. In the event of a subsequent sale, they will be taxed in the standard manner (either at a flat rate of 30% or according to the income tax schedule, plus social security contributions). Capital gains will be calculated based on the value of the securities held on the date of death.

"It is important to note that heirs must pay the deferred social security contributions when the plan is closed. However, it is important not to forget to list this amount as a liability on the estate tax return. This amount of social security contributions becomes a deductible debt that reduces the estate tax liability, and this is something people often forget." This principle was set forth in a ministerial response published in February 2000.