Life insurance: should you open a contract after 70?

Question to an expert

I turned 70, is it still advantageous at this age to pay money on life insurance and should it be done on a new contract?

Payments made on life insurance before age 70 make it possible to transmit one’s assets with a favorable tax regime. On the death of the subscriber, each beneficiary will be able to benefit from an exemption of 152,500 euros. The tax rate will be 20% on the following 700,000 euros, 31.25% beyond. On the other hand, sums paid after this anniversary will be subject to inheritance tax, after a deduction of 30,500 euros.

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But taking out a contract after age 70 has an interest that may ultimately prove to be more advantageous: the gains made on the contract will be 100% exempt. Thus, if I take out a contract for 150,000 euros at age 70 and it is worth 250,000 euros on my death, 119,500 euros will be taxable, and 130,500 euros exempt.

The higher the expected return on your assets and the sums invested, the faster the underwriting after age 70 will become efficient. Gains made on the tax-free contract will reduce the cost of transmission over time. Conversely, for sums paid before age 70, the cost of transmission increases according to this valuation.

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If you pay after your 70s, however, it is better to open a new contract rather than to feed an existing one. Because, if you have to withdraw money from a contract funded before and after your 70th birthday, this withdrawal will often take place both on the “before 70” pocket and on the “post-70” pocket, reducing the inheritance benefits assumed to have been acquired before this anniversary.

Moreover, by leaving a “post-70” contract to be valued independently, you can choose on which life insurance it is more judicious to make your withdrawal.

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