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For people living in France, the Assurance Vie (life insurance) is considered one of the best ways to invest money and organise your inheritance. Here, financial advisor Paul Flintham answers some common questions about an Assurance Vie and its potential advantages and disadvantages.
Paul Flintham is an independent financial advisor with Beacon Global Wealth Management.
The Assurance Vie is essentially a life insurance wrapper that holds investments.
The Assurance Vie has specific tax rates and grows tax-free, making it one of the best ways to hold and grow investments. It is one of the most versatile and efficient tax structures France has to offer. All withdrawals from the policy are treated in two halves: return of capital and profit—the latter being taxable. Offshore versions can also hold different currencies, which is great for those who want to hold onto sterling for the time being.
It’s a great tool to be tax-efficient, grow investments tax-free, and has huge inheritance advantages, especially for those with stepchildren or other relations they want to leave something to. You can also add life insurance to the policy, so an additional sum is paid out after death.
If you have an initial lump sum to invest, you can then use this as a savings vehicle.
Only French tax residents can have an Assurance Vie, including UK nationals living in France. Otherwise, the tax benefits are not available if you are a resident in another country.
To receive the full benefits, the policy should be set up before the age of 70. If set up after 70, the tax allowance for inheritance is only €30,500 in total, limiting the inheritance benefits.
Investments held within the wrapper are not subject to capital gains tax or income tax while the funds remain inside the policy and no withdrawals are made.
Even when money is withdrawn, it is considered a return of capital, and only the growth element is taxable.
For example, if your policy has grown by 5% and you draw €5,000, only €250 (5% of €5,000) will be taxable at a flat investment rate of 30%.
Therefore: €250 x 30% = €75 tax payable.
You may choose to pay income tax at your marginal rate, but most will find the 30% flat tax rate a cheaper option.
Once the policy is over 8 years old, it offers even lower taxes, plus an annual allowance of €4,600 per person income tax-free per year, or €9,200 per couple, with a reduced flat tax rate of 24.7% for policies valued under €150,000.
In France, Droit de Succession dictates how an estate is distributed, favoring children over a spouse, even if it contradicts a Will.
For example, an Assurance Vie can help lower inheritance tax for a stepmother who wants to leave part of her estate to her 3 stepchildren. She may leave €152,500 per beneficiary tax-free.
Without an Assurance Vie, the tax liability for her stepchildren would be 60% each, with only a €1,594 exemption per person, leading to an inheritance bill of €279,755.
They are available in France, as well as internationally in Ireland and Luxembourg. The French ones offer solutions in euros, while the international versions offer different currency options and are fiscally compliant within the French tax system.
At Beacon Global Wealth, we often recommend an International Assurance Vie for our clients, as it is more portable and flexible. It can also change tax jurisdiction when moving between countries in Europe.
An Assurance Vie set up through a French Bank can often generate lower returns than one arranged by an independent financial adviser. Banks typically offer a limited range of funds, which are inflexible and suited more for people staying in France, not for French tax residents who may move back to the UK.
If you would like more information and advice geared towards your personal situation, you can contact:
Paul Flintham | International Financial Adviser | Beacon Global Wealth Management | France
Mobile: +33 6 24 96 27 51 | Landline: +33 5 46 06 51 90
Email: paul@bgwealthmanagement.net
Beacon Global Wealth Management: Central Administration Office, 250 High Street, Guildford GU1 3JG, United Kingdom
Tel: +44 333 241 6966 | Email: enquiries@bgwealthmanagement.net | Website: https://beaconglobalwealth.com
The information on this page is intended as an introduction only and is not designed to offer solutions or advice. Beacon Global Wealth Management can accept no responsibility for losses incurred by acting on the information on this page.
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