Contrat de Capitalisation
Although they are compliant with both expat and nonresident tax and legal statuses, they are sadly not often used by estate planners dealing with the international investor.
They are however a useful tool, when it comes to wealth management, especially successions. Characterized by their similarity with assurance vie policies, mainly because they are taxed identically.
“Contrat de Capitalization” do distinguish themselves from assurance vie, from a legal point of view, as there are not a “stipulation for another”, and do not support beneficiary clauses. These policies obey to the “French common right” succession laws.
Here is a brief resume of the assets offered to clients, looking to optimize their transmission, or their estate:
§ The contract does not end when the policyholder dies the inheritor can choose to keep the policy running after the death of its subscriber,
§ the subscriber can donate the policy, which will keep its tax advantages (example: if the policy is more than 8 years old, it keeps its tax benefits)
§ these contracts can receive funds from a dismemberment (in France, property is very often dismembered, where one person legally owns the “Nue Propriété” (the right to receive the full property, without paying IHT, upon the death of the usufructuary) and the other person legally owns the “Usufruct” (the right to use and rent the property). The value in euros, owned by each party is determined according to Article 669 of the CGI’s scale system. If the property is sold, both parties, may want to keep the dismemberment status, especially as very often the Usufruct, has donated the right to the Nue Propriété, and paid donation tax. The only policy which can accept dismembered lump sums is the “contract de capitalization”.
It’s use however remains very specific, and it is really your estate planner who should suggest you use this policy, rather than or in addition to assurance vie, when planning your succession, or the transmission of your estate.