Focus on Wealth Planning #11: How to use life insurance in wealth planning
How to use life insurance in wealth planning?
There are many benefits to using life insurance to manage your wealth. Let’s take a look at how this powerful savings vehicle can play a role in your wealth management strategy.
What is life insurance?
Life insurance is a way to build capital through premiums paid at your own pace, while also providing protection for you and your loved ones.
How you use that capital will depend on your goals. You might want to earn additional income and/or pass on your capital efficiently.
Tax benefits
Life insurance is highly attractive from a tax perspective.
If you don’t make withdrawals from your life insurance policy, your capital can grow tax-free. You pay only the social contributions, which are deducted each year from interest accrued in euro funds.
If you do withdraw, you pay tax only on the capital gains earned on the policy. A flat tax will apply, unless you opt for the progressive income tax rate of 12.8% after 8 years, or 7.5% in some cases, plus social contributions not already deducted and, where applicable, an exceptional or differential contribution on high income (CEHR/CDHR).
In addition, no inheritance is payable on the capital paid to your designated beneficiaries on your death, for amounts up to €152,500 per beneficiary for premiums paid before your 70th birthday. Above this amount, a 20% flat tax applies up to €700,000 per beneficiary, and 31.25% above that.
Premiums paid after your 70th birthday are subject to inheritance tax after a total allowance of € 30,500, regardless of how many policies and beneficiaries you have.
Capital transferred from your policy to your surviving spouse or civil partner is exempt from inheritance tax.
Life insurance is a powerful tool for managing the cost of passing on your wealth.
Other advantages
As well as the tax benefits, life insurance is very flexible. You can choose from a wide range of assets — such as euro funds, which secure your capital, or financial or real estate unit-linked assets — to diversify your savings in line with your risk profile. It’s important to tailor your investment to your financial goals.
Life insurance can also provide additional retirement income through regular withdrawals, while your remaining capital continues to grow. This makes it an attractive solution for preparing your future with peace of mind, while enjoying constant access to your funds throughout the savings phase. And of course, life insurance is an efficient way to protect your loved ones by ensuring they receive a payout as your beneficiaries upon your death. This is especially reassuring if you want financial security for your children or spouse and ensure they can cover any inheritance tax and final expenses.
How we support you
In short, life insurance is an effective and comprehensive tool for managing your wealth. Other than its tax efficiency, it gives you flexibility to diversify your investments, prepare your retirement and protect your loved ones.
Our wealth planners and private bankers at Societe Generale Private Banking are on hand to discuss how best to make life insurance part of your broader wealth management strategy.
Find other articles:
Focus on Wealth Planning #10: International mobility of people and assets
Focus on Wealth Planning #9: Transferring your real estate assets
Focus on Wealth Planning #8: Estate planning for blended families
Focus on Wealth Planning #7: Financing your lifestyle
Focus on Wealth Planning #6: Protection for vulnerable people
Focus on Wealth Planning #5: Structuring and managing your wealth
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