How to send life insurance to associations and NGOs?

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Pass life insurance to NGOs to support cause photo credits: Getty Images

Pass life insurance to NGOs to support cause photo credits: Getty Images

Life insurance is available not only for the benefit of one or more natural persons, but also for the benefit of a legal entity. In fact, it is possible to transfer all or part of the capital saved in the contract to a nonprofit organization (OSBL). This could be, for example, an association, foundation, or non-governmental organization (NGO). How do you proceed? What are the advantages over traditional bequests? What kind of tax law do you have?

Overview:

  • Overview

  • Why move your life insurance to a non-profit organization (NPO)?

  • How do I designate a foundation, association or NGO as a life insurance beneficiary?

  • What are the benefits of transferring life insurance to a foundation or association?

  • Tax exemption related to transfer to NPO

  • Life insurance policy: When is the deadline for payment of capital at the time of the subscriber’s death?

Overview

-Why transfer your life insurance to a non-profit organization (NPO)?

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-How do you designate a foundation, association or NGO as a beneficiary of life insurance?

-What are the benefits of giving your life insurance to a foundation or association?

-Tax cuts related to transfer to NPO

-Life insurance policy: When is the deadline for payment of capital at the time of the subscriber’s death?

Why move your life insurance to a non-profit organization (NPO)?

Life insurance aims to build up preventative savings or capital to prepare for medium- to long-term projects. This is a French favorite investment, especially because of its flexibility and favorable tax system. At the end of the contract, or in the event of death, the savings and interest will be paid to the subscriber or designated beneficiary in one or more installments (in the form of capital or annuity) (ies). ).

Life insurance also gives meaning to savings and is also a privileged tool for coordinating investment, generosity and commitment. In fact, by designating a nonprofit organization (NPO) as a beneficiary, you will continue to work for one or more causes that are important to you after death. Therefore, whatever the supported project, you give him the means to act.

How do I designate a foundation, association or NGO as a life insurance beneficiary?

Life insurance policyholders are free to choose their beneficiaries. In fact, the beneficiary clause of a contract can refer to multiple people by specifying each share or by naming the beneficiaries in succession thanks to the “failure” formula. They can be natural persons (spouse, family, friends, etc.) or legal entities. In this case, it may be an association, non-governmental organization (NGO), foundation, or other organization recognized as a public utility in general interest.

If you specify a beneficiary, the insurance company must find and notify you of the beneficiary. Therefore, it is important to carefully draft this decision clause in the contract.

To know

The same contract may have multiple beneficiaries, but it is possible to have multiple contracts for the benefit of the same nonprofit.

What are the benefits of transferring life insurance to a foundation or association?

The transfer of capital from a life insurance policy is often compared to a bequest, as long as it is valid at the time of the death of the policyholder. A bequest is a provision that allows a person to transfer all or part of his or her heritage. It may be real estate or furniture (amount, bank assets, etc.). It requires drafting of will and is only effective after the death of a person. You can only bequeath a “disposable part”, that is, a part of your property that is not reserved for the heir by law (called a “reserved part”). Conversely, the capital paid for life insurance is considered not part of the subscriber’s assets. Therefore, you are exempt from inheritance tax rules. Life insurance is not included in the calculation of your property, and its transmission is not governed by the rules of genetic preparation. Heirs do not have the right to the capital accumulated under your life insurance unless the premiums paid are considered to be “clearly excessive” with respect to your income or your assets. However, if, through life insurance, some of the assets that are considered imbalanced are attributed to a third party and they consider themselves to be unfairly treated, the compulsory heirs will deem the assets. You have the right to take legal action to bring it into your property.

Nonprofit organizations (NPOs) can be designated as both universal insured and beneficiaries of life insurance policies. If you have a compulsory heir, the organization may receive all of your available parts. If you don’t have a direct heir and want to satisfy distant relatives and friends, this device allows you to send more by limiting the inheritance rights. Even if the Recipients Association is exempt from fees, you still have to pay a certain fee. If the amount of the bequest is too small for administrative procedures or fees, or if you have debt, you can refuse the inheritance. Life insurance is outside the real estate, so she can still maintain profits. However, acceptance of a life insurance policy can be conditioned on acceptance of real estate.

To ensure that your wishes are respected, it is essential to state the full name of the association or foundation to be donated and the address of its headquarters. Ambiguous expressions such as “fighting cancer” and “environmental protection” cannot allocate funds. If not specified or ambiguous, the invested amount will be reintegrated into the property. The wisest thing to do is to notify the selected organization in advance of your wishes and to the insurer with which you have a contract.

Tax exemption related to transfer to NPO

Organizations that benefit from donation or inheritance transfer tax exemptions are not taxed if they are beneficiaries of life insurance (Article 795 of the General Tax Act). Therefore, remittances of your capital are not subject to inheritance tax. Of course, it is possible to specify associations and foundations that are not subject to this tax exemption. By choosing life insurance, a satisfied organization can benefit from a tax system that is more favorable than a bequest.

If not within the scope of Article 795, nonprofits are subject to the following taxes:

  • Premiums paid before the age of 70 are exempted up to a maximum of € 152,500 per beneficiary and then subject to a 20% tax (31.25% above certain thresholds).

  • Premiums paid after the age of 70 are exempt from the maximum € 30,500 for all beneficiaries, after which 60% is taxed.

Organizations interested in inheritance tax exemption

Tax exemptions relate to so-called “large capacity” organizations. Among them are the majority of Recognized Public Utility Foundations (FRUP) and Recognized Public Utility Associations (ARUP). This is a structure that, in particular, carries out general activities of charity, education, science, society, humanitarian, sports, family, cultural nature, or contributes to the strengthening of artistic heritage, the defense of the natural environment, or the dissemination of culture. Related to French and scientific knowledge, donation funds, aid and charity, religious organizations, accredited congregations, university foundations, partnership foundations, higher education institutions recognized by public interests.

Life insurance policy: When is the deadline for payment of capital at the time of the subscriber’s death?

Insurers notified of a subscriber’s death have a 15-day grace period to contact the beneficiary body and ask them to provide all necessary documents for payment. Upon receipt, the insurance company must pay the capital or annuity within one month. If he does not meet this deadline, the capital will automatically generate interest at twice the statutory interest rate for one month and then three times the statutory interest rate. Payment speed is another benefit of life insurance over bequests. To be sure, bequests rely on the settlement of real estate, which can take months or even years.

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