For many expats in France, assurance vie is the backbone of financial planning. It is flexible, tax-efficient, and widely recommended as the best way to pass on wealth. But in recent months, we have seen an increasing number of cases where heirs are left frustrated, waiting months for funds, or even facing unexpected tax bills, all due to one small detail: the beneficiary clause.
Think of it like a French trust
If you are from the UK or the US, the easiest way to understand an assurance vie is to think of it as working a bit like a trust.
- The money is generally outside your estate when you die.
- It is paid directly to the beneficiaries, not through the estate.
- It has its own tax treatment, separate from inheritance.
- You can appoint someone to act like a trustee. For an assurance vie, that should be your notaire.
This comparison makes it clear: the paperwork that directs who gets what matters enormously. Just as with a poorly drafted trust, if the beneficiary clause is incorrect, the whole structure can fail.
Where it goes wrong?
Here are some real-world problems we have seen:
- Outdated names: Divorce, remarriage, children or grandchildren arriving, but the clause was never updated.
- Unclear wording on the beneficiary clause: Insurers asking for genealogical research to prove no other heirs exist.
- Different interpretations: Each insurer applies French succession rules in its own way. Some have even paid funds abroad without tax guidance, leaving heirs responsible for declarations (and penalties if they get them wrong).
- The beneficiaries are outside of France: This is a big one, since most of you reading this will have beneficiaries abroad and this can get extremely complicated.
- Tax scrutiny: Contracts opened after age 70 (including money added after that age) attract particular attention from the tax office because a certain amount does enter the estate. Errors in reporting can lead to lengthy investigations.
- Use of Brussels IV: Where it does fall back into the estate, assurance vie providers get quite lost as to what to do and how to handle the beneficiary clause, and investigations are lengthy and invasive.
A significant risk: losing all the advantages
If the clause is unclear, insurers have no choice but to pay the money into your estate. That might sound harmless, but it is the worst outcome.
Why? Because the whole point of assurance vie is that it sits outside your estate. If it falls back in, you lose the benefits:
- The funds are taxed under normal inheritance rules.
- They must follow forced-heirship laws, even if that was never your intention.
- Your heirs face delays as the assurance vie is settled as part of the estate.
In short, the very features that make assurance vie attractive can be wiped away by a poorly worded clause.
Why using a notaire fixes this
When the beneficiary clause directs the insurer to follow the notaire’s instructions, none of these issues arise.
- The notaire confirms who the beneficiaries are.
- The insurer simply pays according to that instruction.
- There is no “interpretation” by the insurer, and no risk of the money being redirected to the estate. If payments have been made after the age of 70 the notaire can distribute the portion inside the estate appropriately.
- The tax advantages of assurance vie are preserved.
Your notaire acts like a trustee would in the UK: a central authority who holds your wishes, keeps them updated, and ensures they are applied correctly when the time comes.
Three practical steps
- Check your clause: Look at your assurance vie. If it lists beneficiaries directly, it may need revising.
- Speak to your notaire: Ask them to manage the clause, just as a trustee would in the UK. (note that an assurance vie should never be mentioned in a will).
- Update your insurer: This part is vital. Unless the insurer has the new clause on file, they will follow the old one.
What will it cost?
Many people worry that involving a notaire will be expensive. In reality, the cost is modest compared with the problems it avoids.
- While alive: Asking your notaire to draft or hold a beneficiary clause usually costs no more than a few hundred euros, and is sometimes included if you are already updating a will or other paperwork.
- At death: When the notaire carries out your instructions, they apply a small charge to the capital. If you get it wrong: If the clause is unclear and the money falls back into the estate, the notaire must treat it as part of the succession. That means higher fees and the loss of all the assurance vie advantages.
In short, spending a little now is like buying insurance against far bigger costs and complications later.
A final thought
Assurance vie is still one of the most effective tools in French estate planning. But, like a trust, it is only as good as the wording that governs it. A vague or outdated clause can cause months of delay and unnecessary tax. A clause managed by your notaire ensures clarity, speed, and that your heirs receive the full advantages the law allows.
So, before the year ends, take a moment to check yours. It could be the simplest way to protect your family’s peace of mind.