🧠 Calquify Intelligence
Writing a UK life insurance policy in trust is the single easiest and most effective IHT planning tool — free, takes 15 minutes, and removes the policy from the estate entirely
A UK life insurance policy owned by and payable to the policyholder's estate is included in the estate for IHT purposes — adding to the taxable value. However, placing the policy in a trust (writing it in trust) means the policy proceeds pass directly to the trust beneficiaries outside the estate and outside probate. No IHT applies. No probate delay (life insurance in trust pays within days; probate takes months). The insurer provides free trust forms — the policyholder completes a simple declaration of trust naming beneficiaries. This takes 15 minutes and costs nothing. A £500,000 life policy held outside trust incurs up to £200,000 in IHT; the same policy in trust incurs zero. Despite this, surveys consistently show fewer than 10% of UK life policies are written in trust. This is the most impactful undone financial planning action in the UK.
Source: IHTA 1984 §167; HMRC IHT Manual IHTM17100-17800
French assurance-vie is a fundamentally different product from UK life insurance — it's primarily an investment wrapper and the most widely used estate planning tool in France
French assurance-vie holds approximately €1.8 trillion in assets (2025) — representing about 40% of French household financial savings. It is primarily an investment wrapper (unit-linked or guaranteed rate) that also has a life insurance element. On death, the proceeds pass to named beneficiaries outside the succession ('hors succession') under specific tax rules: for premiums paid before age 70, each beneficiary receives €152.500 tax-free, with 20% above up to €700.000 and 31.25% above. These allowances are per beneficiary and completely separate from the €100.000 succession allowance — so a parent can give a child €100.000 through succession AND €152.500 through assurance-vie entirely tax-free. This 'double allowance' effect makes assurance-vie fundamental to French estate planning.
Source: CGI Art. 990-I — assurance-vie taxation; FFSA assurance-vie statistics 2025
Germany's Lebensversicherung is included in the estate unless specifically structured as a third-party beneficiary policy — a common planning error
German Lebensversicherung (life insurance) is generally included in the estate for Erbschaftsteuer purposes if it pays to the estate or the policyholder's heirs in their capacity as heirs. However, a Drittbegünstigung (third-party beneficiary designation) — where the policyholder names a specific beneficiary who receives the proceeds in their own right, not as heir — removes the policy from the estate. The technical distinction: the proceeds are treated as a gift (Schenkung) at the time of death from the policyholder to the named beneficiary — subject to gift tax rules (same rates as inheritance tax). This means: policy + spouse beneficiary = €500.000 gift tax exemption applies (no tax below €500.000). The structure requires careful wording in the policy — a general 'to my heirs' designation does not achieve Drittbegünstigung.
Source: ErbStG §3 — Erwerb durch Lebensversicherung; BFH ruling on Drittbegünstigung
Tax on €500k Life Insurance Payout by European Country — Child as Beneficiary
National tax authorities 2026
📋 Reference Data
Life Insurance Payout Taxation — European Countries 2026
National tax authorities + STEP + EIOPA
| Country | Default — Inside Estate? | Trust/Beneficiary Clause Available? | Tax Treatment Outside Estate | Key Allowance | Notes |
|---|---|---|---|---|---|
| UK | Yes — unless in trust | Yes — write in trust (free, insurer forms) | 0% IHT — completely outside estate and probate | Unlimited (entire sum assured) | Best estate planning tool in UK — free, immediate, powerful |
| France | No — assurance-vie is hors succession by law | Named beneficiary required — but automatic for assurance-vie | 20% above €152.500 / 31.25% above €700.000 (pre-70 premiums) | €152.500 per beneficiary (separate from succession €100k) | Post-70 premiums: €30.500 shared + succession rates on gains |
| Netherlands | Yes — levensverzekering in estate by default | Yes — begunstiging (beneficiary clause) in policy | Proceeds to named beneficiary: treated as gift/inheritance at death — erfbelasting applies | Normal erfbelasting exemptions apply | Naming a beneficiary doesn't fully escape erfbelasting — it changes who pays |
| Germany | Yes — unless Drittbegünstigung | Yes — specific third-party beneficiary designation required | Treated as gift to named beneficiary — Schenkungsteuer at inheritance tax rates | Normal inheritance/gift tax exemptions (€500k spouse; €400k child) | General 'to my heirs' designation = inside estate; specific named beneficiary = outside |
| Italy | No — excluded by law (Art. 1920 CC) | Named beneficiary required — automatic exclusion | Not succession tax — passed directly, separate from estate | Normal succession exemptions do not apply to excluded payout — income tax may apply | Polizza vita a favore di terzo — one of EU's most favourable life insurance treatments |
| Spain | Depends on structure | Named beneficiary — partial exclusion | If named beneficiary: may be subject to ISD (succession tax) or IRPF (income tax) depending on structure | Autonomous community rates vary — Group I/II may benefit from bonifications | Complex — depends on whether policy classified as savings or protection |
| Belgium | Yes — included in estate | Beneficiary designation available | Reduced rate possible but not full exclusion — varies by region | €12.500 children's allowance (Brussels) | Belgium: complex interaction between succession tax and life insurance |
| Ireland | Yes — unless in trust | Yes — similar to UK structure | 0% CAT (Capital Acquisitions Tax) if policy in trust | Policy value excluded from estate | Section 72 policy: specifically designed for CAT planning in Ireland |
| Switzerland | Depends on canton and structure | Named beneficiary available | Cantonal rules apply — many cantons exclude life insurance from estate | Varies by canton | Zug/Zurich: zero for family — life insurance mainly protects from creditors |
| Sweden | N/A — no inheritance tax | N/A | N/A | N/A | Sweden: no IHT — life insurance for income replacement only |
| Portugal | Excluded if named beneficiary | Named beneficiary required | Stamp duty only — 10% | Relatively low rate | Portugal: life insurance payouts relatively favoured |
ⓘ The crucial distinction across Europe: does the life insurance payout form part of the estate (subject to inheritance tax) or pass directly to the named beneficiary outside the estate? UK: always outside if in trust. France: always outside (assurance-vie is hors succession by law). Italy: always outside if named beneficiary. Netherlands and Germany: inside unless specifically structured. The planning implication: always name a specific beneficiary in life insurance policies — a 'payable to estate' designation is almost always worse.
France Assurance-Vie Tax Treatment — Pre-70 vs Post-70 Premiums
CGI Articles 990-I and 757-B
| Premium Timing | Beneficiary Allowance | Rate Above Allowance | Cap for Lower Rate | Rate Above Cap | Notes |
|---|---|---|---|---|---|
| Before age 70 (pre-70) | €152.500 per beneficiary | 20% | €700.000 per beneficiary | 31.25% | Independent of succession €100k allowance — can stack both |
| After age 70 (post-70) | €30.500 SHARED among all beneficiaries | Succession rates apply (5-45% for children) | N/A — normal succession rates | N/A | Only capital gains portion; original premiums taxed at succession rates |
| Before age 70 — example (child) | €152.500 exempt | 20% on €150k = €30.000 | Below €700k cap | N/A | Child inheriting €300k via assurance-vie: €30.000 tax |
| Succession route — same child | €100.000 exempt | 20% on €200k = €40.000 | N/A | N/A | Child inheriting €300k via succession: €40.000 tax |
| Combined strategy | €100.000 (succession) + €152.500 (AV) = €252.500 exempt | Rate applies to remainder only | N/A | N/A | Stack both allowances — most tax-efficient French planning |
| Post-70 — 3 children | €30.500 ÷ 3 = €10.167 each | Succession rates on balance | N/A | N/A | Post-70: much less favourable — fund assurance-vie early |
ⓘ The age-70 rule is the most important assurance-vie planning consideration. Premiums paid before age 70 benefit from the €152.500 per-beneficiary allowance — these are the most tax-efficient. Premiums after age 70 share a €30.500 allowance across all beneficiaries and are subject to succession tax rates on the capital. Planning implication: maximise assurance-vie contributions before age 70. Existing contracts: continue paying before 70 rather than waiting. The 31.25% rate for large pre-70 assurance-vie (above €700.000 per beneficiary) is still significantly better than the 45% top succession rate.
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🔬 Methodology & Sources
Life Insurance Payout Taxation Data
Life insurance payout taxation sourced from national tax authorities and EIOPA. Treatment varies significantly between 'life insurance in trust' (UK), assurance-vie (France), Lebensversicherung (Germany/Austria), and levensverzekering (Netherlands). The key distinction across Europe: whether the policy passes inside or outside the estate for inheritance tax purposes.
Formula
Payout_taxable = Policy_proceeds × (1 − estate_exclusion) − Applicable_allowance | Rate = Country_specific_IHT_or_income_rate
CitationIHTA 1984 §167 (UK trusts); CGI Art. 990-I (France assurance-vie); EStG §20 (Germany Lebensversicherung); Successiewet 1956 (Netherlands).
❓ Frequently Asked Questions
Yes — if the policy is written in trust. A life insurance policy in trust passes the proceeds directly to the named beneficiaries outside the estate and outside probate. No inheritance tax applies — regardless of the sum assured. If the policy is not in trust (payable to the estate), the proceeds are included in the estate and subject to 40% IHT above the nil rate band. Writing a policy in trust is free (the insurer provides trust forms), takes about 15 minutes, and is one of the most powerful IHT planning tools available. Despite this, surveys show fewer than 10% of UK life policies are in trust. If you have a UK life policy, check its trust status today.
French assurance-vie is an investment wrapper — essentially an investment account with a life insurance element — holding approximately €1.8 trillion of French savings. On the policyholder's death, the proceeds pass to named beneficiaries outside the succession ('hors succession') under specific tax rules. For premiums paid before age 70, each beneficiary receives a €152.500 allowance completely separate from the €100.000 succession allowance. A child can receive €100.000 tax-free through succession AND €152.500 tax-free through assurance-vie — €252.500 total tax-free from one parent. Above the assurance-vie allowance: 20% tax up to €700.000 per beneficiary, then 31.25% — still significantly lower than the 45% top succession rate.
Not in the same way as the UK or France. In the Netherlands, naming a beneficiary on a levensverzekering (life insurance policy) means the proceeds pass directly to them — but the Belastingdienst still treats this as an inheritance from the deceased. The recipient pays erfbelasting (inheritance tax) on the insurance proceeds under the normal rules — using their available exemption (€795.156 for a partner, €23.223 for a child). The benefit of naming a beneficiary is avoiding probate delay and ensuring the money reaches the right person quickly — not avoiding inheritance tax. Unlike the UK, there is no Dutch equivalent of 'writing in trust' to remove life insurance from the estate for tax purposes.
German life insurance (Lebensversicherung) proceeds are included in the estate for Erbschaftsteuer unless the policy uses a Drittbegünstigung (third-party beneficiary designation). With a Drittbegünstigung: the named beneficiary receives the proceeds directly as a deemed gift at the time of death — not as an heir. The amount is subject to Schenkungsteuer at the same rates as inheritance tax, but using the beneficiary's personal allowance. Example: spouse named as beneficiary receives €500.000 — this is a deemed gift of €500.000, fully within the €500.000 spouse allowance = zero tax. Without the specific Drittbegünstigung wording (a general 'to my heirs' clause), proceeds go to the estate and are taxed normally as inheritance.
Yes — Italian law (Codice Civile Art. 1920) provides that life insurance proceeds payable to a named third-party beneficiary (polizza vita a favore di terzo) are excluded from the deceased's estate. They do not count toward the succession, they are not subject to the quota legittima (forced heirship rules), and they are not taxable under Italian inheritance tax. The beneficiary receives the proceeds directly and tax-free (the €1m exemption + 4% rate structure applies to the succession, not to insurance payouts). Italian life insurance is therefore genuinely excluded from the estate — not just for inheritance tax purposes but also for forced heirship. This makes it a powerful tool for directing wealth to chosen beneficiaries who might not be the legal heirs.
Sources & References
Data sourced from official institutional publications. Results are for informational purposes only. Last reviewed Jan 2026.
Data Disclaimer
Life insurance tax treatment varies by policy type, jurisdiction, and circumstances. This is general information only — consult a qualified financial adviser and tax adviser in your jurisdiction.
Life insurance tax treatment varies by policy type, jurisdiction, and circumstances. This is general information only — consult a qualified financial adviser and tax adviser in your jurisdiction.