A minor child can hold a life insurance contract. It is the parents who must open it, in particular to build up capital for it over the long term. And the grandparents can make a donation invested in the contract. Like the Livret A , the Housing Savings Plan (PEL), the Housing Savings Account (CEL), life insurance is a savings medium that can be opened in the name of a minor child. This tax envelope is a long-term savings product that provides certain advantages, particularly in terms of taxation of gains (after 8 years).
A long-term savings product
Life insurance is a long-term savings product. The contract can be multi-support, that is to say integrate a fund in euros which ensures the protection of the invested capital and units of account making it possible to diversify the invested capital. These units of accountare mainly Undertakings for Collective Investment (OPC), namely Sicavs and Mutual Funds. Depending on their management objective, they can be invested in the equity, money market, bond markets, be diversified across these three asset classes, be sector-based (gold, commodities, technology stocks, etc. ), centered on a specific geographical area ( France, United States, emerging countries, etc.). Brief ! The choice is generally very wide and it is therefore recommended to read the Key Information Document (KID) carefully before investing.
Banks and insurance companies offer “intergenerational” contracts. But in fact, all life insurance contracts can be taken out in the name of a minor.
Precautions before taking out a life insurance policy
As with any savings product, a few rules must be observed before getting started. First of all, the level of subscription fees (which apply to payments), management (on the outstanding amount of the contract) and arbitration . Then, it is advisable to take stock of the investment vehicles offered. It is a long-term placement, even very long-term if the child is very young, because he will not be able to touch it until he is of age. It is therefore preferable to have several investment options to provide good diversification. In addition, attention must be paid to the distribution of invested capital. Between the secure euro fund , but whose performance has been in constant decline for 20 years, and units of account, sometimes with great potential, but displaying a risk of capital loss, you must know how to invest, and do not hesitate to seek advice from a specialist.
Finally, it is appropriate, and this is the great particularity of these savings products opened in the name of a minor child, to lay down a few “rules of life and management”. It is in this context that it is often advisable, especially when it is the grandparents who wish to make a donation for the benefit of their grandchildren, to add an “assistant pact” to the contract.
The assistant pact (made under private signature)
The donation with assistant pact is a perfect and very effective solution for grandparents who wish to make a donation to their minor grandchildren while keeping an eye on the use of the funds. The assistant pact, made under private signature , can organize the administration of the funds resulting from the donation. One can also define the conditions of use of the funds by the minor by blocking the withdrawals until, at the latest his 25 years, thanks to the clause of temporary inalienability . This can make it possible in particular to limit the risk of squandering the funds.
It is possible to carry out simultaneously all the steps related to a manual donation ( Cerfa document 2735 ) and to the subscription of a life insurance contract opened in the name of the minor. As a reminder, it is possible to donate the sum of €31,865 every 15 years per grandparent and grandchild.
Even if it is the grandparents who pay the funds, it is the legal representatives who must open the contract. If the child is under 12, the agreement and signature of both parents are required.
Fixed-term life insurance contracts
Another possible solution for grandparents: take out a fixed- term contract . In this context, it is the grandparent who remains the policyholder and designates his or her grandchildren as beneficiary. It sets the date on which the transfer will become effective, for example when the child turns 25. Even if the insured dies before, the sums will continue to grow within the contract.
At the estate level, life insurance offers certain advantages depending on the date of payment of the capital. For sums invested before the age of 70, the capital transferred outside the estate to the designated persons, up to 152,500 euros