Life insurance allows you to pass on an inheritance to your loved ones in the event of sudden death. But not only ! It’s also a great way to put part of your heritage at the service of a cause that is close to your heart. To do this, simply designate the association of your choice as the beneficiary of some or all of the funds. This operation has a number of advantages, but must be done in accordance with certain rules.
Send your life insurance to an association: what are the advantages ?
Passing on life insurance to an association has two main advantages:
A simple and cost-free procedure
To make a bequest, it is imperative to resort to the services of a notary. The latter is responsible for drafting a will and registering it to avoid any dispute after death. This process involves costs and the possibilities for modification are very limited.
With life insurance contracts, on the other hand, things are a bit simpler. The subscriber can choose the beneficiary on the membership form or by simple handwritten letter addressed to the insurance company. This does not generate no charges and he is possible to change your choice at any time.
Tax-related advantages
The capital saved within the framework of a life insurance contract escapes the traditional rules of an inheritance. It is therefore possible to make a donation in an amount greater than the share legally reserved for children. The only condition to be respected in this case is that the amount bequeathed is not « manifestly exaggerated » in relation to the donor’s patrimony.
In addition, if the chosen beneficiary is a public utility organization, such as a Cancer Control Center, the transfer is exempt from transfer tax upon death. For example, no inheritance tax is payable if the subscriber signs up to a contract before his 70th birthday. Ditto if, even over the age of 70, the amount of his premiums is less than € 30,500. In other cases, the tax rate is 60% after an allowance of 1,594 euros.
What type of organization should you send your life insurance to?
Not all associations can directly receive funds from a life insurance contract. Only those carrying out a philanthropic, social, humanitarian, religious, scientific, sporting, family, cultural or environmental activity are authorized.
The recognized public utility organizations the following can also benefit from these funds:
- Dotation funds ;
- Assistance and charitable associations;
- Cultural associations;
- Authorized congregations
- Partnership foundations.
Note that for these, recognition of public utility must occur before the death of the subscriber. Otherwise, the heirs have the possibility of opposing the execution of the succession.
How to designate an association as beneficiary of its life insurance?
Sending your life insurance to an association is a very simple procedure. It suffices for this, to write a beneficiary clause. However, in order to avoid any litigation in the future, it is important to take a few steps:
A clear and precise mention
To avoid any confusion, clearly mention the name and registered office of the association. Do not just mention its purpose, because several associations can defend the same cause. It has already happened, because of an ambiguity on a life insurance contract bequeathed for the fight against cancer, that the judge decides on a distribution of funds between all the associations having the same social object. The case law is rich in other cases of litigation brought before the courts because of difficulties of interpretation of this kind.
Payment terms
The life insurance policyholder must also define the form of the service from which the association will benefit. This benefit can take the form of a single payment of a capital or an annuity. It is also possible to impose a payment in installments subject to compliance with certain conditions. The subscriber can in particular make the payment conditional on a precise use of the funds or on the achievement of certain predefined objectives. The association will then obtain the release of funds only if it meets the conditions set.
Pay attention to the amount of premiums!
If the amount of premiums in your contract is clearly excessive in relation to your income and your lifestyle current, your beneficiaries can, later, take legal action. Indeed, the operation can be seen as an attempt to disinherit your reserved heirs. The judge can then order the reintegration of the capital into your estate. It is therefore important to take this parameter into account for an uncomplicated transmission.
Finally, to transmit your life insurance to an association, it is also possible to designate multiple beneficiaries or some chain beneficiaries. In the first case, it suffices to clearly specify the share to be received by each association. In the second case, you can for example choose a friend as the first beneficiary, and an association second. The capital will then be transferred to said association if your friend died when your estate was opened.
Read also: The taxation of life insurance
