life insurance policy

Can the life insurance policy be transferred?

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The donation supposes, within the meaning of article 894 of the Civil Code, “ an act by which the donor strips himself currently and irrevocably of the thing given in favor of the donee who accepts it ”.

Donation by designating the life insurance contract

”  Insurance law gives the subscriber of a life insurance contract the right to designate a beneficiary free of charge,  ” explains Jean-Claude Veille, co-founder of the Cieleden.com website .

This donation constitutes an indirect donation of a particular nature, in fact, the object of the donation is constituted by the benefit of the contract which must be distinguished from the donation of the property of the contract itself.

The gift of ownership of the contract is based on article L 132-2 paragraph 2 of the Insurance Code. This article does not expressly refer to the assignment of the insurance contract but refers to it by stating: “The consent of the insured must, on pain of nullity, be given in writing, for any assignment or constitution of pledge and for transfer of benefit of the contract taken out on his head by a third party. »

Give yes, but how?

This article allows the contracting party to assign ownership of its contract. The subscriber makes a donation for the value of the mathematical provision reached by the contract on the day of the transfer. In practice, the assignment can take place in the forms provided for the assignment of receivables by article 1690 of the Civil Code, i.e. by delivery of the contract to the assignee with notification to the insurer, or by notarial deed. involving the insurer, or by endorsement.

In the absence of case law and by a cautious interpretation of article L 132-2 of the Insurance Code, it must be considered that this text only covers the transfer of ownership of the contract, i.e. the transfer of the assets that he represents.

But this transfer does not concern all the rights attached to the person of the original subscriber and more particularly the right to designate the beneficiary. Indeed, it should be remembered that only the subscriber can make a change of beneficiary.

When the donee wishes to hold all the rights of the subscriber-donor, the subscriber should be substituted. This substitution, which allows the donee to exercise all the rights held by the donor, entails novation within the meaning of article 1271 paragraph 3 of the Civil Code.

According to this article, there is novation when, by the effect of a new commitment, a new creditor is substituted for the old one, towards which the debtor is discharged. In this case, it is advisable to proceed with a redemption of the contract subscribed by the donor, the capital received being immediately replaced in a new contract subscribed by the donee, who can then designate a new beneficiary.

This novation has tax consequences: the transfer gives rise to a new contract which justifies the taxation of the capital gains realized according to the date of subscription of the original contract and the new contract constitutes the starting point of the tax calculation. possible redemptions to take place; however, the shorter the duration of the contract, the greater the taxation of redemptions. We see that novation causes the benefit of the previous duration to be lost.

In all cases, it should be specified that transfer duties are due on the savings transferred.

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