What is the ‘assurance-vie’ our French bank is offering us?
An assurance vie is available to both French and non-French nationals
Most banks offer assurance vie policies
Chingyunsong / Shutterstock
Reader Question: Our bank advisor has offered us an assurance vie policy a few times now. We have not come across it before, but from its translation we assume it is just a life insurance policy. Is this correct?
Despite its name, assurance vie is not what one might consider a standard life insurance policy that simply pays out upon your death (known as an assurance décès in France), but is a tax efficient life insurance wrapper that holds investments.
In normal circumstances it can pay named inheritors a significant tax-free sum upon the death of the policy holder.
Assurance vie is offered by most traditional brick and mortar banks and is popular for the advantages it brings.
As well as their favourable tax treatment many are also attracted to assurance vie for the fact that savings inside are invested securely and can offer a good level of return. This is subject, of course, to any non-cash holdings, equity-linked for example, not suffering a long term decrease in value.
Funds can be passed to inheritors tax-free to a threshold of €152,500. Any remaining payment above this amount will then be subject to inheritance tax. The policy must be started before the age of 70 to achieve this tax treatment although there are still benefits even if starting past this age.
In addition to the favourable tax treatment on the death of a policyholder, funds can be accessed during the life of the policy. Withdrawals are likely to be free of tax as they are considered a return of capital.
This includes gains made on the investments also if the assurance vie policy has been held for at least eight years. In this case up to €4,600 (€9,200 if held by a couple) of growth can be withdrawn each year without tax being due.
Read more: How do French financial products compare to those in UK and US?
If buying an assurance vie via a bank they may well also undertake the relevant paperwork and tax filing for policyholders.
Nuances of the policy can change depending on your bank, and it is recommended to thoroughly research financial policies before entering into them. Do check the level of fees as these can vary by assurance vie provider / policy.
Read more: Married + living in France with assurance vie? Check clauses
