How to waive the benefit of a life insurance policy?


(Photo credits: Pixabay – Arek Socha)

We frequently speak of acceptance of a life insurance contract but not of the reverse procedure which consists of renouncing the benefit of a contract. She may be motivated by tax reasons and the desire to favor other members of her family. It must be distinguished from the renunciation of inheritance and surround yourself with all the necessary precautions before putting it in place. Finally, we must not confuse renunciation of the benefit of a contract and the fact of terminating it, which supposes the respect of a particular formalism.

If life insurance is so successful with savers, it is because it allows capital to be passed on to relatives under very advantageous tax conditions. The cornerstone of a successful transfer is the beneficiary clause of the contract. If the subscriber is free in the designation of the beneficiary or beneficiaries of his contract, the beneficiaries are also free in their choice to accept the contract or to renounce it. Although it is less frequent, the renunciation of the benefit of a contract can have a patrimonial justification. Explanations.

What is the point of giving up the benefit of life insurance?

In a succession, an heir can decide to waive participation in the devolution of the estate. In the context of life insurance, a beneficiary can also refuse to receive the capital to which he could have claimed. The reasons can be various but the main interest is often motivated by taxation. For example, if a parent, a first-rank beneficiary, renounces the contract in favor of his children, designated as second-rank beneficiaries, the latter will benefit from a more optimal transfer of capital. Indeed with life insurance it is possible to transmit up to 152,500 euros without rights to pay, whereas in the context of a classic succession the existing reduction between parents and children is only 100,000 euros. Moreover, by renouncing the contract, the transmission of capital takes place while the parent is still alive, which is never the case in an estate. It is therefore possible to optimize a transmission of capital within a family in this way.

How do I waive the benefit of life insurance?

There is no particular procedure except to inform the insurance company by registered mail (see model letter of waiver for life insurance) that you waive the benefit of the contract. However, it should be borne in mind that the beneficiary clause must be correctly drafted for the waiver to produce the tax effects sought. It must be written in cascade, that is to say, it must indicate first-rank beneficiaries, and if the latter withdraw, the clause provides that their living or represented children be designated second. In the event that there are no second-rank beneficiaries, the waiver will transfer the capital of the contract to the subscriber’s estate. That is to say, it will be taxed with inheritance tax like any other property of the subscriber.

Do I have to give up the benefits of a life insurance contract if I renounce a succession?

The renunciation of a life insurance contract is not necessarily linked to the renunciation of an estate. It is quite possible to waive one and not the other for the simple reason that a life insurance contract is considered to be “outside the estate” under article L 132- 12 of the Insurance Code. If an heir renounces a succession, he therefore does not lose the status of beneficiary of a life insurance contract. But it is still necessary that the beneficiary clause has been correctly drafted. If it mentions the concept of heir, which is frequent in the standard clauses of contracts, the fact for a beneficiary to have renounced the succession will lead to the loss of the quality of beneficiary, for lack of more precise elements of identification. . Whereas if the beneficiary is designated by name and rank, he may renounce the inheritance and retain the benefit of life insurance despite the loss of his heir status. However, this kind of estate optimization cannot be improvised on a corner of the table and requires the support of a legal professional (lawyer or notary) and that all stakeholders are included in the reflection at the time of writing. of the clause. In the first place the subscriber, who must anticipate that his children may want to waive the capital of the contract, for the benefit of their own children. But also the beneficiaries designated first who must think about the tax consequences of their renunciation concerning their children.

What is the difference between waiver and withdrawal of life insurance?

Waiver of the benefit of life insurance should not be confused with waiver of the life insurance contract. In the latter case, it is more precisely a retraction or termination, even if in everyday language it is the term waiver that comes up most often. This involves terminating the contract and canceling the subscription when it has already been signed. The procedure requires compliance with a certain formalism. It must be exercised within a maximum period of 30 calendar days (weekends and public holidays included) from the receipt by the subscriber of the insurance proposal and the information note. In practice, this period generally runs from the date of signature of the subscription form or the insurance proposal.

The termination request must be made by registered letter with acknowledgment of receipt. Some insurers provide a model letter of waiver in the insurance proposal which must then be returned to them. But it is also possible to do it free paper.

life insurance waiver letter template

The waiver letter can be written according to the following model:

“By this registered letter with acknowledgment of receipt, I have the honor to exercise the option of waiver provided for in Article L132-5-1 of the Insurance Code, upon my subscription to the Boursorama Vie contract, number of the membership (…), subscribed on (…) and to request full reimbursement of the sums paid.

Date and signature.”

What are the consequences of withdrawal?

From receipt of the waiver, the insurer has 30 days to reimburse the subscriber for all sums paid. Failing this, the company may pay default interest to the subscriber calculated at the legal rate increased by half for 2 months, and at the legal rate multiplied by two after the two months. The legal interest rate is published every six months. It has been 3.12% since June 25, 2021.

It should be noted that in life insurance funds are never blocked or lost. Which means concretely that after this period, even if the subscriber can no longer terminate his contract, he can however carry out a total redemption on it. The operation will result in the termination of the contract. But contrary to the termination, there will be application of the taxation related to a repurchase operation.

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