Insurance

Terre d’Epargne – Life insurance: opening a contract in the name of a minor child – PATRIMOINE24 – All the news about wealth management

[Pictet] The subscription of a life insurance contract for a minor child offers opportunities.

To constitute or place an inherited inheritance, the effectiveness of the life insurance is higher than that of the booklets. Precautions can be taken to supervise the use of the funds and avoid the reclassification as taxable donations of the payments feeding the contract.

Minor children are often equipped with a bank account and one or more passbooks. They are less so in life insurance contracts. However, it is never too early to prepare for their future.

Build up long-term savings with life insurance

Long-term investment benefits from potential returns higher than those of regulated savings books. When the children are minors, the capital can be invested in diversified media that enhance it and reduce the risk of loss even if it is never completely cancelled. In addition, unlike savings accounts, the amounts invested in life insurance are not capped. The savings regularly made up during the minority of the young person could, for example, make it possible to finance his higher education, constitute a contribution for his first real estate purchase, or be used for any other personal project requiring a more or less important starting capital.

Placing inherited capital on a life insurance policy

Life insurance is a privileged medium for investing the funds received by a minor child via a gift or an inheritance. Thanks to tax incentives for donations, transgenerational transmissions are multiplying to the benefit of grandchildren, who are minors at the time of the donation or inheritance. Furthermore, it is possible for donors to set up safeguards against lavish use of the sums donated and deposited in the life insurance contract. This protection, possible up to the child’s 25th birthday, requires the drafting of a pact attached to the donation. This restricts, for example, the possibilities of withdrawals for the child up to a certain age, or reserves the management of the contract to a parent.

Regularly feed the life insurance contract

The life insurance contract taken out in the name of the minor child can be supplemented occasionally or regularly by the parents, family or relatives, on the occasion of birthdays, traditional holidays or special events. These payments can be considered as customary donations (not subject to gift tax) when their amount is not considered exaggerated by the tax authorities, in particular with regard to the contributory capacity of the donors. The latter can regularly fund the contract, by transfer, for example, between their bank account and that of the child, redirecting the amount transferred to the life insurance contract.

The specifics of a minor’s life insurance contract

Subscribing to a life insurance policy is a so-called “disposition” act. The minor child cannot do it alone. If it is subject to the legal administration of both parents, the contract must be signed by both parents. In case of disagreement between them, the subscription will be possible only with the authorization of the guardianship judge. Since 2016, when the child has a single legal administrator, the latter no longer needs to seek authorization from the judge.

Whatever the situation of the child, from the age of 12, the personal consent of the minor child is required. Subscribing to a contract in the name of a minor has another specificity: the designation of the beneficiary. This depends on the age of the minor child. Before the age of 16, the law does not authorize the minor, nor his parents, to designate a beneficiary in the event of death. By default, the beneficiary clause therefore designates “the legal heirs”. On the other hand, after the age of 16, having acquired the capacity to carry out acts of disposal, the minor may designate one or more beneficiaries.

The main thing to remember

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