Q&A Corner – When planning succession, should I choose an assurance vie or a contrat de capitalisation and what tax allowances apply?

Q: When planning succession, should I choose an assurance vie or a contrat de capitalisation and what tax allowances apply? 

A: For inheritance-tax efficiency, assurance vie can be the best option, but only for payments made before age 70 as they benefit from the €152,500 allowance per beneficiary. After 70, only a €30,500 shared allowance applies. While gains remain exempt, this limit is often too small for larger estates. 

While the contrat de capitalisation doesn’t have particular inheritance-tax advantages, it can work better after 70. Instead of being confined to the €30,500 post-70 limit, you can use the €100,000 parent-to-child gift allowance and apply démembrement (gifting the bare ownership) to reduce the taxable value. Because tax is based only on the bare ownership – which is lower for older adults – it is reduced. At death, the beneficiary becomes full owner with no extra inheritance tax, making this structure more efficient for those over 70.