Managing your capital

10 December 2020

How can life insurance help you plan your estate?

Are you concerned about planning your estate and ensuring the wellbeing of your loved ones? Life insurance could be one of the solutions to meet your needs.

With a life insurance policy, you are free to decide who will receive the invested capital at the time of your death, by transferring your capital to one or more persons, such as your grandchildren or other relatives. Inheritance rules and duties apply in accordance with Belgian legislation; it is therefore advisable to respect your children's reserved shares (half of your assets are reserved for them).

Life insurance to facilitate the transmission of assets

Unlike traditional savings or investments (in your savings account or in an investment fund, for example), a life insurance policy is an excellent formula for planning the transfer of your assets as you wish, without having to make a will.

  • Great flexibility. A life insurance policy allows you to designate the persons who will receive the capital of this life insurance at the time of your death (one or more persons, such as your children, grandchildren or other persons). As the policyholder, you can also change the beneficiaries over time, where, for example, a donation is usually irreversible.
  • A life insurance policy allows you to continue to use the nest egg you have built up. You therefore keep control of your assets and the income they generate.
  • Speed. The accumulated assets are available more quickly if the beneficiary or beneficiaries are named specifically. With a life insurance policy, you do not have to wait for the estate to be closed by the notary before you can dispose of the capital. Please note, however, that inheritance tax will also be due on these assets.

Let us illustrate this with a concrete example

More and more grandparents want to save or invest for the benefit of their grandchildren. Belgian inheritance law provides that half of their assets go to their children (this is called the reserved portion). The deceased may allocate the balance to whomever he or she wishes. And life insurance policies are no exception to these principles. Let us take the example of Michel, widower and father of one child (Matthew). He is also the grandfather of Louis (seven years old) and Josephine (ten years old). His capital amounts to 400,000 euros in movable assets (let's assume here that he does not own any real estate assets).

Good to know

With life insurance, the policyholder (Michel) can, if he wishes, retain most of the rights to the property linked to the policy. Moreover, this inheritance provision does not require the father's consent. The fact that the father does not intervene is a significant flexibility in this respect. Moreover, if he has named the beneficiaries, they will be able to dispose of the capital on Michel's death and will not have to wait for the estate to be closed.

Which life insurance solution?

The best known and most widely offered life insurances in Belgium are Branches 21 and 23.

  • The savings plan: Branch 21 life insurance policies Branch 21 life insurance policies are medium or long-term savings insurance policies that offer you a guaranteed return. You pay an entry fee (generally 3%) and tax (2%, except for the pension savings plan which benefits from the specific taxation of pension savings) when you take out the insurance. When your policy reaches its maturity date, you will get back the premiums you have saved, the interest and any profit-sharing. Please note that if you withdraw your capital before maturity, the insurer may charge you a fee and you may be penalised from a tax point of view. A Branch 21 policy allows you to build up savings in a secure way. However, since interest rates are currently very low, the returns on Branch 21 are also close to zero. For this reason, we only offer this solution as a tax savings plan, not as a classic savings plan. Indeed, the tax advantage granted as part of the tax savings allows this product to remain financially interesting, which is not the case when you cannot benefit from a tax deduction (the interest rate being too low to cover costs and taxes). Click here to find out more about our Branch 21 life insurance solutions for tax purposes and all useful information about tax deduction possibilities.
  • The investment plan: Branch 23 life insurance policies By investing in Branch 23 investment insurance, the insurer with whom you take out the policy invests your capital in an investment fund. While such an investment does not offer a guarantee on the capital invested, it does offer a potentially higher return over the long term than a savings product. In addition, Branch 23 offers flexibility in terms of deposits and withdrawals. You can invest a single premium, invest smaller amounts on a recurring basis, at your own pace, or combine a single premium with recurring premiums. You are charged insurance tax of 2% and an entry fee (usually 2%) on each premium paid. Withdrawals can be made at any time, and Branch 23 offers the significant tax advantage of not being subject to withholding tax on capital gains, regardless of when you make your withdrawal. Please note, however, that redemption fees may be charged by the insurer depending on when you make these withdrawals. Would you like to find out more about our Branch 23 investment insurance solutions? Check out the investment specific page on our website.

Looking for more information?

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