The 152,500-Euro Allowance Per Beneficiary: How It Works

The 152,500-euro allowance is one of the most powerful tax advantages of life insurance (assurance vie) for estate transfer. Provided for by Article 990 I of the Code general des impots (CGI), it allows each designated beneficiary to receive up to 152,500 euros in death benefits completely free of any levy. This allowance, which is individual and applies to each beneficiary, is the main reason why life insurance is considered the preferred vehicle for estate transfer in France. To get the most out of it, it is essential to understand the conditions of application, calculation mechanisms and optimisation strategies. This article examines each aspect of this fundamental allowance in depth.

Conditions of application

The age-at-contribution criterion

The 152,500-euro allowance applies exclusively to death benefits corresponding to premiums paid before the insured person's 70th birthday. It is the date of payment of each premium that determines the applicable tax regime -- not the date the policy was taken out, nor the date of death.

If an insured person pays premiums both before and after age 70 on the same policy, both regimes coexist. The insurer allocates the death benefits between the portion falling under Article 990 I (premiums paid before 70 and their associated gains) and the portion falling under Article 757 B (premiums paid after 70). This allocation can be complex, which often justifies taking out separate policies.

One allowance per beneficiary, across all policies

The 152,500-euro allowance is assessed according to three cumulative rules:

• Per beneficiary: each person designated as a beneficiary has their own 152,500-euro allowance. Two children as beneficiaries therefore have a combined allowance of 305,000 euros.
• Across all policies: if the same beneficiary is designated on several life insurance policies taken out by the same insured person, the 152,500-euro allowance is global. It does not apply policy by policy but on all capital received.
• Across all insurers: the allowance is unique, even if the policies are held with different insurers. The tax authorities centralise information via the 2705-A declarations filed by each insurer.

Exemption for the surviving spouse and PACS partner

Since the TEPA law of 21 August 2007, the surviving spouse and PACS partner are completely exempt from the levy on death benefits, regardless of the amount received. They do not consume the 152,500-euro allowance: they benefit from a full exemption that sits on top of this mechanism. The allowance therefore remains fully available for other beneficiaries.

Detailed calculation of the levy

The rate schedule beyond the allowance

Beyond the 152,500-euro allowance, death benefits are subject to the following progressive levy:

• From 0 to 152,500 euros: 0% (allowance)
• From 152,500 to 852,500 euros: 20%
• Above 852,500 euros: 31.25%

The 31.25% bracket was introduced by the 2012 supplementary finance act. It applies to capital exceeding 852,500 euros per beneficiary, i.e. 700,000 euros beyond the allowance.

The tax base

The tax base includes the premiums paid before age 70 plus all interest and capital gains generated by those premiums. Unlike Article 757 B, which taxes only premiums (exempting interest), Article 990 I taxes the capital in its entirety. This means that the policy's performance mechanically increases the tax base.

Strategies for optimising the allowance

Strategy 1: Multiply beneficiaries

Since the allowance is individual, each additional beneficiary opens a new 152,500-euro allowance. It is therefore strategically sound to designate grandchildren alongside children, include nephews, nieces or godchildren in the beneficiary clause, and spread capital across multiple beneficiaries rather than concentrating on one.

A policyholder with 2 children and 4 grandchildren can transfer up to 915,000 euros (6 x 152,500 euros) without any levy, compared to 305,000 euros by designating only the 2 children. The potential saving is considerable.

Strategy 2: Take out multiple policies

Although the allowance is global per beneficiary, taking out multiple policies has practical advantages: clear attribution (one policy per beneficiary simplifies management), differentiated investment strategy, independent modification of beneficiary clauses, and separation of contributions made before and after age 70.

Strategy 3: Contribute before age 70 -- an absolute priority

Turning 70 marks a radical change in tax regime. The allowance drops from 152,500 euros per beneficiary to 30,500 euros global. A contribution of 152,500 euros made at age 69 can be transferred entirely free of levy to a single beneficiary. The same contribution made at 71 qualifies for only 30,500 euros of global allowance shared among all beneficiaries (Article 757 B of the CGI).

It is therefore essential to plan contributions well in advance and anticipate the 70th birthday. Large contributions should be scheduled early enough to avoid the risk of reclassification as manifestly excessive premiums (primes manifestement exagerees).

Strategy 4: Combine with standard inheritance allowances

The 152,500-euro life insurance allowance stacks with standard inheritance allowances, since the Article 990 I levy is a sui generis levy, distinct from inheritance duties:

• 100,000 euros per child in direct line
• 31,865 euros per grandchild
• 15,932 euros between siblings
• 7,967 euros for nephews and nieces

A parent can therefore transfer to each child 152,500 euros via life insurance + 100,000 euros via standard inheritance, i.e. 252,500 euros per child completely free of duty, combining all mechanisms.

Strategy 5: Use a split beneficiary clause (clause demembree)

When the beneficiary clause is split, the quasi-usufructuary (spouse) and each bare owner (child) are treated as distinct beneficiaries. Each has their own 152,500-euro allowance. The allowance is divided between the usufructuary and the bare owner according to the schedule in Article 669 of the CGI, based on the usufructuary's age at the time of the insured's death.

Since the spouse is exempt, they do not use their share of the allowance. The children benefit from their allowance calculated on the bare-ownership value, which is even more favourable because their taxable share is reduced by the split.

Points of caution

Globalisation of the allowance

The tax authorities centralise information transmitted by different insurers via the 2705-A declaration upon death. If a beneficiary is designated on several policies from the same insured person held with different insurers, the single 152,500-euro allowance will be divided proportionally among the policies. A regularisation will be carried out if the total allowances applied by different insurers exceed 152,500 euros.

The concept of determined or determinable beneficiary

To qualify for the allowance, the beneficiary must be determined or determinable at the time of death. A vague clause such as "my close friends" is insufficient. However, "my heirs" (mes heritiers) is considered determinable by case law. A complete absence of a beneficiary clause results in the reintegration of the capital into the estate, with permanent loss of the 152,500-euro allowance.

The impact of split clauses on calculation

In the case of a split, the 152,500-euro allowance is divided between the usufructuary and the bare owner according to the Article 669 schedule. For example, if the usufructuary is 72 years old, the usufruct value is 30% and the bare-ownership value is 70%. The bare owner's allowance is then 152,500 x 70% = 106,750 euros.

The risk of legislative change

The 152,500-euro allowance is regularly criticised in public debate as being overly generous. Reform proposals periodically emerge aiming to reduce or cap this amount. While no modification has been enacted to date, it is prudent to take advantage of the current tax framework by making contributions well in advance.

Conclusion

The 152,500-euro allowance per beneficiary is a formidable tax lever that, properly used, enables the transfer of very large sums with remarkably reduced taxation. Its effective use rests on four pillars: anticipating contributions before age 70 to fall under the Article 990 I regime, multiplying beneficiaries to multiply allowances, carefully drafting the beneficiary clause to secure designations, and combining with standard inheritance allowances to maximise tax-free transfer. Combined with split-clause strategies and multiple policies, it forms the foundation of effective and lasting estate planning.