Assurance Vie for Expats in France: Key Features and Considerations

For high-net-worth individuals moving to or already living in France, assurance vie is likely to feature in conversations about investing, tax planning and passing wealth to the next generation.

Despite its name, assurance vie is not simply conventional life insurance. It is a long-term investment structure that can hold a range of assets, provide access to capital and may offer potentially valuable French tax and succession-planning treatment.

However, assurance vie should not be viewed as an automatic solution for every expatriate. Relevant considerations may include the policy terms, underlying investments, costs, tax residence and nationality of the investor.

This is particularly important for internationally mobile families with assets, beneficiaries or tax obligations in more than one country.

What Is Assurance Vie?

Assurance vie is an insurance-based investment contract between an individual and an insurer. The policyholder invests a capital sum or makes a series of contributions, which are then allocated to one or more investment options.

Depending on the contract, these may include:

• Euro-denominated funds
• Bonds and fixed-income investments
• Equity funds
• Multi-asset portfolios
• Property-related funds
• Exchange-traded funds
• Specialist or alternative investments

Some contracts provide access to a relatively limited investment range, while others offer wider choice and greater flexibility. Certain policies may also allow investments to be held in different currencies, which can be relevant for international families.

The policyholder normally retains access to the capital through full or partial withdrawals, known in France as rachats. This makes assurance vie different from a pension, where access may be restricted until a particular age or event.

Why Assurance Vie Appeals to High-Net-Worth Expats

Assurance vie can bring together investment management, tax planning, access to capital and estate planning within a single structure.

For a high-net-worth expatriate, this may help simplify a portfolio that has become fragmented across several countries, providers and currencies. It may also provide a way to hold investments within a structure recognised by the French tax system.

Tax deferral while investments remain within the policy

• Flexible access through partial withdrawals
• A wider choice of investments within certain contracts
• Potential tax advantages after the policy has been held for eight years
• Beneficiary nominations for succession planning
• The ability to hold different currencies in some policies
• Consolidated reporting and administration

These advantages are subject to French law, policy terms and personal circumstances.

While an Assurance Vie can offer tax and estate-planning benefits in France, it is not suitable for every expat. Charges, investment restrictions and complex tax reporting can reduce its appeal, particularly for US citizens who may face additional IRS reporting and potentially unfavourable tax treatment. Rules may also differ across jurisdictions, so an arrangement that works well in France may create complications if you later relocate

How Is Assurance Vie Taxed in France?

One of the principal characteristics of assurance vie is that tax will generally arise when a withdrawal is made rather than whenever underlying assets are bought, sold or produce income within the policy.

When a partial withdrawal is taken, the entire payment is not normally treated as taxable investment growth. The withdrawal is divided proportionally between a return of the policyholder’s original capital and the gain generated by the contract. It is the gain element that is potentially taxable.

The precise treatment depends on several factors, including:

• When the contract was opened
• When contributions were made
• How long the contract has been held
• The total amount invested across relevant policies
• Whether the investor selects flat-rate or progressive taxation
• The policyholder’s tax and social-security position

For newer contracts held for fewer than eight years, gains may generally be subject to the applicable flat-rate tax treatment or, where selected, the progressive income-tax scale.

Once a contract has been held for at least eight years, the policyholder may benefit from an annual allowance against the taxable gain element of withdrawals. Under current rules, the allowance is €4,600 for a single taxpayer or €9,200 for a married or PACS couple taxed jointly.

The taxation of gains above these allowances can depend on the amount contributed and the dates on which premiums were paid. Social charges may also apply. Service Public provides details of the current taxation of assurance vie withdrawals.

These rules make timing important. Opening an appropriate contract sooner can start the eight-year holding period, even if the initial contribution is relatively modest. However, any decision to establish a policy would need to take account its terms, costs and long-term suitability.

Flexible Income and Withdrawal Planning

For retirees and financially independent expatriates, assurance vie can potentially support a planned income strategy.

Rather than withdrawing large sums irregularly, policyholders may be able to arrange partial withdrawals designed around their annual expenditure and tax position. As only part of each payment may represent taxable growth, this can offer a different outcome from receiving dividends or interest directly.

High-net-worth investors may consider assurance vie alongside pensions, cash reserves, rental income and other investment accounts. The appropriate withdrawal sequence will depend on personal objectives, market conditions, tax allowances and estate-planning priorities.

Large withdrawals should be assessed carefully, particularly where the policy has not yet reached its eighth anniversary or contains investments that may be difficult to sell quickly.

Choosing the Right Underlying Investments

Assurance vie is a structure, not an investment in itself. Its performance still depends on what is held within it.

A cautious investor might favour capital-security or lower-volatility assets, while someone investing over several decades may accept more equity exposure. For HNWI families, portfolios may need to address a combination of capital growth, income, preservation and succession objectives.

Factors relevant to the investment strategy may include:

• Capacity and willingness to accept investment risk
• Time horizon
• Income and liquidity requirements

• Existing business and property exposure
• Currency of future expenditure
• Geographic and sector diversification
• Fees and policy charges
• The insurer’s financial strength
• Availability of appropriate investment management

Some euro funds may offer capital protection from the insurer, subject to policy terms and the insurer’s ability to meet its obligations. Unit-linked investments do not generally provide the same protection, and their value can fall as well as rise.

A contract offering hundreds of investments is not necessarily better than one with a smaller, carefully selected range. Quality, transparency, costs and suitability matter more than the number of available funds.

Assurance Vie and Estate Planning

Assurance vie can also be an important part of French succession planning.

The policyholder can name one or more beneficiaries to receive the policy proceeds following their death. Subject to the applicable rules, these proceeds may be treated separately from the ordinary estate and may benefit from specific inheritance-tax treatment.

The age of the policyholder when contributions are made is especially important. Broadly, different rules apply to premiums paid before and after age 70. The date of the contract, the amount contributed, the beneficiary’s relationship to the policyholder and the policyholder’s residence at death can also influence the outcome.

The beneficiary clause should therefore be drafted and reviewed carefully. A standard clause naming “my spouse, failing that my children” may not reflect the needs of:

• Blended families
• Unmarried partners
• Financially dependent relatives
• Beneficiaries living outside France
• Families wishing to divide benefits unequally
• Individuals requiring trust or guardianship arrangements

Assurance vie does not remove the need for a French or cross-border will. The beneficiary nomination, will, matrimonial regime and wider estate plan should work together.

Important Considerations for International Families

Not every assurance vie contract receives identical treatment in every jurisdiction.

A policy recognised as tax efficient in France may be treated differently if the policyholder later moves abroad. Their home country may not recognise the French tax deferral, while overseas beneficiaries could have separate reporting or tax obligations.

US citizens require particular care because they remain subject to US tax and reporting rules while living overseas. Some underlying funds may create problematic US tax treatment, including potential Passive Foreign Investment Company considerations.

Existing policies held outside France may also need to be declared. French residents are generally required to report qualifying foreign life insurance and capitalisation contracts using the relevant tax forms. The French tax authority explains the reporting requirements for overseas contracts.

International portability should therefore be considered from the outset, particularly if another relocation is likely.

Is Assurance Vie Right for You?

Assurance vie can be a valuable tool, but it is not a complete financial plan.

Before investing, consider how the contract will interact with your pensions, overseas investments, property, business interests and estate-planning arrangements. Charges, investment restrictions, surrender conditions and the financial standing of the provider should also be examined.

With 40 years of experience supporting international families manage their wealth, Blacktower can help you assess whether assurance vie has an appropriate role within your wider cross-border financial plan.

This article is for general information only and does not constitute financial, investment, tax or legal advice. Tax treatment depends on individual circumstances and may change. Investment values can fall as well as rise, and you may not get back the amount invested. Professional advice should be obtained in each relevant jurisdiction before taking action.

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