In France, life insurance is often viewed as the final step in a wealth planning strategy. In practice, it can also form the starting point for the next phase: preserving and organising family wealth over the long term.
For some families, combining life insurance with a corporate structure and a capitalisation contract can provide a framework that supports both investment and the transmission of substantial family wealth across multiple generations.
A Different Approach to Long-Term Wealth Preservation
Holding assets directly typically results in annual taxation of dividends and interest, together with taxation upon the realisation of capital gains.
By contrast, a French company investing through a capitalisation contract benefits from a specific tax regime. Under Article 238 septies E of the French Tax Code, annual taxable income is determined by reference to a fixed actuarial rate, equal to 105% of the latest published TME (Taux Moyen des Emprunts d’État), irrespective of the actual performance of the underlying assets.
Importantly, this mechanism does not eliminate taxation but changes its timing. By replacing taxation based on actual income and gains with a fixed actuarial rate, allows a greater proportion of the assets to remain invested over time.
Illustrating the Structure
Consider a family expecting substantial life insurance proceeds following the death of a parent.
From the outset, the beneficiary clause of the life insurance policy has been drafted with a long-term wealth preservation strategy in mind. It provides that the beneficiaries may contribute all or part of the death proceeds received to a French company established for to hold and manage family wealth.
Following the death of the insured, the beneficiaries receive the death benefit and contribute the assets to the company. The company then subscribes to a capitalisation contract and becomes the long-term holder of the family’s financial assets.
Such arrangements are generally more relevant where substantial amounts are involved and where preserving family wealth over generations is as important as transferring it efficiently.
Governance and Continuity
A corporate structure may also provide for the establishment of governance arrangements tailored to the family’s objectives.
Depending on the circumstances, these may include:
- Different classes of shares
- Voting arrangements between family members
- Appointment of directors or managers
- Shareholders’ agreements or family charters
- Mechanisms to facilitate gradual transfer of ownership across generations
In this way, ownership of family wealth can pass gradually from one generation to the next while remaining within a consistent long-term investment framework.
Continuity Beyond One Generation
Another attractive feature of the capitalisation contract is its permanence.
Unlike life insurance, it does not terminate on death. It remains an asset of the company and is unaffected by changes in share ownership.
Parents may gradually transfer shares in the company to their children while maintaining the same investment strategy. The underlying assets do not need to be liquidated and recreated following each succession event.
This continuity can be particularly valuable for families seeking to preserve substantial wealth across multiple generations.
Investment Flexibility Within a Stable Structure
From an administrative perspective, the company holds a single asset: the capitalisation contract.
Within that structure, the investment strategy may evolve over time. Depending on eligibility requirements, the contract may include discretionary mandates, listed securities, bonds, structured products, private market assets and other diversified investments.
Changes to the portfolio allocation can be made without altering the ownership structure, helping to simplify administration and support a consolidated approach to wealth management.
A Complementary Role Alongside Life Insurance
Life insurance and capitalisation contracts should not be viewed as competing solutions.
Life insurance can facilitate the efficient transfer of wealth and provide liquidity to beneficiaries.
A French company holding a capitalisation contract can then provide a structure for managing and preserving that wealth over the longer term.
For some families, the challenge is not simply transferring assets efficiently, but ensuring that wealth remains invested, organised and capable of supporting future generations.
In that context, the combination of life insurance, a corporate structure and a capitalisation contract may help families balance efficient wealth transfer with the long-term stewardship of substantial assets across generations.