TLDR: There is no single, general law recently adopted on life insurance and inheritance in the sources examined. Law No. 2014-617 of 13 June 2014 mainly concerns inactive bank accounts and unclaimed life insurance policies. For inheritance, the treatment depends primarily on the policy coverage, the designation of the beneficiary, and the date and amount of the premiums paid.
The law of 13 June 2014
Law No. 2014-617 of 13 June 2014 on inactive bank accounts and unclaimed life insurance policies organises the mandatory deposit with the Caisse des dépôts et consignations of unclaimed sums.
For a life insurance policy, the deposit takes place at the end of a period of ten years from the date the insurer becomes aware of the death of the insured or from the policy maturity date. The sums returned by the Caisse des dépôts may then be subject to the applicable tax levy. [S001, S012]
This law does not replace the tax rules applicable to the transfer of the capital upon death.
The effect of designating the beneficiary
When a life insurance policy providing death coverage specifies an identified or identifiable beneficiary, the capital or annuity does not, in principle, form part of the insured’s estate. Any duties due are then calculated according to the tax rules specific to insurance policies and, in particular, according to the relationship between the beneficiary and the insured. [S001, S002]
In the absence of a beneficiary, or when the designation becomes ineffective, the guaranteed capital or annuity forms part of the deceased’s estate and is subject to transfer duties free of charge under ordinary law rules. [S001]
You therefore cannot conclude that all life insurance capital is automatically excluded from the estate.
Tax rules according to the policy and the premiums
A life insurance policy providing life coverage generally provides for payment of the benefit if the insured is alive at the end of the policy term. It is therefore, in principle, not subject to transfer duties upon death. A life insurance policy providing death coverage becomes payable when the insured dies during the policy term; specific inheritance and tax rules mainly concern this category as well as certain mixed policies. [S001, S009]
For policies falling under the first paragraph of Article 757 B of the French General Tax Code, only premiums paid after the insured’s seventieth birthday are taken into account in the basis for transfer duties upon death, according to the applicable regime. This rule alone does not make it possible to describe the entire tax treatment of the policy. [S001]
For inheritances opened since 1 January 2016, the surrender value of a life insurance policy taken out with community funds and not terminated upon liquidation of the marital community is not fiscally included in the community assets, regardless of the status of the designated beneficiary. In this situation, it therefore does not constitute an element of the estate assets used to calculate the duties payable by the heirs of the deceased spouse. [S008]
Reporting obligations
If you are the beneficiary of a life insurance policy providing life or death coverage taken out since 20 November 1991, you must declare policies taken out on the life of the same insured when premiums were paid after their seventieth birthday.
If you are also an heir, legatee or donee, this information must appear in the declaration concerning the inherited assets received. If you do not have any of these statuses, you must file the inheritance tax return under ordinary law conditions. [S011]
What you need to remember
The applicable regime depends on four elements: the coverage provided by the policy, the existence and validity of the beneficiary clause, the age of the insured when the premiums were paid and the date on which the inheritance was opened.
When an heir also receives a transfer through life insurance, the duties may be assessed by distinguishing between the estate assets and the sums originating from the policy. The designation of the beneficiary, the nature of the policy and the applicable tax rules must therefore be examined separately. [S001, S002]