Amid the ebb and flow of our daily lives, it’s always wise to pause and examine our financial situation. Regardless of the time of year, taking stock of our fiscal health can lead to better financial decisions and peace of mind.
From the global pandemic’s long-reaching implications to geopolitical tensions and widespread inflation, our fiscal world has been on a rollercoaster ride. Despite the media’s portrayal, this kind of market turbulence is not uncommon, and while it may continue for a while, it’s not a signal for us to bury our heads and ignore it.
Now, more than ever, reviewing our finances, preferably with a professional, is crucial. This could not be more valid for those residing in France, where ignorance about laws and tax obligations does not absolve you from them. We must stay abreast of what we need to know, even though this can be challenging.
The Assurance Vie is one financial vehicle that simplifies matters, particularly from a tax standpoint. This instrument, essentially a life insurance wrapper for investments, is popular among French tax residents, including expatriates. It is known for its tax efficiency and versatility and for the inheritance tax benefits it provides.
The Assurance Vie, similar in many ways to the UK’s stocks and shares ISA, could be a powerful ally in your inheritance tax planning. However, the Assurance Vie presents a significant difference based on the age you invest: under 70 versus over 70.
Investing in an Assurance Vie under the age of 70 allows you to pass on up to €152,500 free of inheritance tax to any beneficiary you designate. Should the investment exceed this amount, a favourable tax rate of 20% applies to the next €700,000. This is an attractive offer compared to standard inheritance tax rates, which can rise to 60% for non-relatives.
However, if you choose to invest in an Assurance Vie over the age of 70, the tax-free allowance drops to €30,500. Beyond this, the regular inheritance tax rates apply. Nevertheless, this does not mean an Assurance Vie isn’t worthwhile past 70. You could use it to supplement an existing Assurance Vie, potentially raising a beneficiary’s inheritance from €152,500 to €183,000 or spreading the additional €30,500 across multiple beneficiaries.
Furthermore, should you start a new Assurance Vie after turning 70, any gains or interest on the initial €30,500 investment are not subject to death duties. So, if your investment grows over time, the total amount can be passed to the beneficiary without incurring death duties.
Remember, the Assurance Vie is more than just an inheritance planning tool. Its tax efficiency applies throughout your lifetime, even when drawing an income from it.
As always, you must take into account your specific needs before investing. An Assurance Vie is often a medium to long-term investment, and various providers have different terms and penalties for early withdrawal. A notable plus is that an International Assurance Vie can be held in GBP, Euros, or USD and is portable, meaning if you move out of France, you can take your investment with you.
In essence, the Assurance Vie brings unique benefits at various stages of life. We invite you to reach out to us, your team of finance experts, to determine if this investment aligns perfectly with your portfolio and meets your financial objectives. After all, each financial journey is unique, and we are here to guide you through it.