A summary of the main differences between a French contrat de capitalisation and an assurance vie in 2023
A Capitalisation Contract (contrat de capitalisation) in France has most of the same features of a French Assurance Vie except for the following differences:
- A Capitalisation Contract can be held by a company or a person whereas an Assurance Vie can only be held by a person.
- An Assurance Vie can be held until death whereas a Capitalisation Contract can be held for a maximum of 30 years.
- A Capitalisation Contract can continue after death whereas an Assurance Vie ends on death and its proceeds are distributed to the client’s beneficiaries. If your beneficiaries choose to continue the Capitalisation Contract, it will keep its fiscal age for the purposes of the eight-year rule (see A summary of the French Assurance Vie in 2023).
- A Capitalisation Contract can be donated whereas an Assurance Vie cannot. Donations can be used to reduce your exposure to French inheritance tax (Droits de Succession). As an example, if you donate 100,000 euros to your children and live for at least 15 years, your beneficiaries will not normally have to pay any taxes on the gift at the time of writing (October 2023)
- A Capitalisation Contract can be partially donated, called démembré in French, which means that the owner donates the capital but maintains the right to the income from the contract.
- The value of a Capitalisation Contract is added to your estate on death for the purposes of French inheritance tax whereas an Assurance Vie has special, normally advantageous, rules.
The views expressed in this article are not to be construed as personal advice. Therefore, you should contact a qualified, and ideally, regulated adviser in order to obtain up-to-date personal advice with regard to your own personal circumstances. Consequently, if you do not, then you are acting under your own authority and deemed “execution only”. Additionally, the author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Importantly, this article is dated and is based on legislation as of the date. It should be noted that legislation changes, but articles are rarely updated. Sometimes a new article is written; so, please check for later articles. Additionally, check for changes in legislation on official government websites. Finally, this article should not be relied on in isolation.