Many people are familiar with the Assurance-Vie, a popular, tax-efficient investment structure in France that can be arranged by financial advisers or banks. Assurance-Vie can be seen as a simple investment, however, with professional planning can also provide substantial tax benefits.

To illustrate this, here is an example of planning we recently carried out for new clients.

Mr & Mrs A had €680,000 to invest, were both in their early 70s and had two children who would eventually inherit the funds. Since Assurance-Vie provides more benefits if set up before age 70, they worried they had left it too late.
Another adviser had suggested they invested in a jointly held Assurance-Vie with both children nominated as beneficiaries. The first €30,500 would be succession tax free and any growth also outside of the calculation (the succession tax benefits for those over 70). This provided an immediate tax saving of €6,500. 

Our first suggestion was that they both take out an Assurance-Vie, as this would give each of them a tax saving of €6,500. However, there were further tax savings to be gained.

You may have come across the planning device in France called a usufruct. Basically, it gives someone the right to enjoy an asset without actually owning it. Some (though not all) Assurance-Vie providers allow usufructs to be set up under the Assurance-Vie upon death.

In this instance, we suggested using such a usufruct beneficiary clause. This would mean that when the first of the couple died, whilst the funds would be deemed to pass to the children for succession tax purposes, they would first be given to the surviving spouse to use for income.

Another benefit is that the value allocated to the usufruct is determined by the beneficiary’s age at the time of death. If Mr & Mrs A were in their 70s, this discount is 30% of the asset’s value – immediately the taxable value is reduced by €151,000. The tax liability is now reduced by €30,200, as opposed to the €6,500 from the original advice.

The incorporation of tax planning in any financial planning advice can make a significant difference. The tax savings illustrated above are quite typical and for those with more funds the savings can be substantial. For example, we assisted a client with assets worth €2.14m, including pension funds. If Mr C had done nothing, his tax liability upon death would have been around €847,000. By carefully restructuring his investments, this was reduced to €64,500, saving his beneficiaries over €782,000.

So, it’s certainly worth taking the time to seek specialist tax plannng advice and explore all your options, to establish how much tax you can save for you and your family.

Contact us for advice on your situation

The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.