Life insurance: The obligation to provide information on the content of tax law weighs heavily on insurance brokers and insurance companies.

Article from the editorial department on February 27, 2022

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Judges recalled that they place a heavy obligation on insurance companies and insurance brokers as life insurance policy professionals to provide information on the content of applicable tax laws set out in Section 757B of the CGI. .. This indicates that investing an amount in a life insurance policy can be tax inefficient for heirs.

For the record, it continues from the provisions of CGI Article 757-B The amount, pension or securities payable by the insurer due to the death of the insured depends on the degree of kinship that exists between the beneficiary and the insured. Percentage of premiums paid after age 70 over € 30,500.

Enacted in 1992, the purpose of this device is to prevent insurance contracts from being signed solely for the purpose of invalidating the transfer tax at the time of death.

Recollection of facts:

The CD died leaving one of his sons, BY, as the only beneficiary of her life insurance policy.

In a letter dated February 10, 2014, the latter compensated Company S for € 5,000 because the mother was badly advised to make a financial investment in life insurance policy S over the age of 70. I asked for.

In a letter dated March 26, 2014, in letterheads of S and SG, Mr. Y was told that due to his controversy, funds were blocked until the allocation was made.

MY summoned Company S and SG to the judge, ordered them to return the four life insurance policies issued by their mother, and ordered S to send him the return on the investment to be paid. After this summon, Company S created a pending contract, except for the TC contract.

By order of November 4, 2014, a chamber of commerce judge found that the contract and notice had been communicated after the subpoena was issued, and gave S his funds under four contracts, Mr. Y. I ordered it to be returned to.

S paid the funds on November 20, 2014, and paid 16% of the capital configured on the CD’s death date, the transfer tax on the death of premiums paid after the age of 70 in accordance with the provisions of Article 757. Withholding withholding. B of CGI.

Mr. Y summoned S and SG before the Paris TGI to compensate for his damages for failing to notify, advise, and warn that the defendant was indebted at one foot. .. , CD.

By a decision of June 8, 2020, TGI dismissed all of Mr. Y’s claims for compensation.

I appealed to that decision.

Hint

The court has just confirmed the ruling in all its provisions.

In this case, the obligation to provide information about the guarantees subscribed weighed on SG acting as a broker and company S, an insurance company, as well as the obligation to provide information on the tax system applicable to the contracts subscribed. In contrast. The obligation to provide advice related to numerous contract subscriptions and applicable tax systems weighed heavily only on SG.

For breach of your obligation to provide information and advice regarding the tax system applicable to your life insurance policy, the court will specify:

  • Insurance brokers and insurance companies Obligation to provide information about the suitability of the products offered, along with personal circumstances and purpose of transmission.. The broker is also obliged to advise on these same factors.

  • The fact that they are oppressing them as professionals from the perspective of life insurance contracts, and the obligation to provide information on the content of applicable tax laws set out in Article 757B of CGI from the age of 70, leads to this. At the threshold, the total investment in life insurance policies is less tax efficient for heirs. The broker is obliged to advise on options for transferring assets.

important

In certain cases, the courts and courts deemed that they did not meet their obligation to advise on the tax laws to which SG applies. A contract event withdrawn 70 years later.

However, the court dismissed the claim for damages and confirmed the decision unless Mr. Y showed that he had lost the opportunity now and certainly in direct connection to the adverse event.