Against a backdrop of fiscal tightening, the 2026 Finance Act has introduced an unprecedented measure that deserves the full attention of life insurance policyholders: the ability to transfer capital from their contract during their lifetime through a gift, while benefiting from the €152,500 per-beneficiary allowance normally reserved for death benefit transmission. A powerful estate planning lever to activate without delay.

A Temporary Scheme with Precise Conditions

The provision adopted within the 2026 Finance Act allows life insurance policyholders to make a partial or full withdrawal from their contract, then donate the withdrawn sums to their designated beneficiaries, benefiting from a gift tax exemption of up to €152,500 per beneficiary. This mechanism effectively transposes, during the policyholder’s lifetime, the tax advantage provided by Article 990 I of the French General Tax Code.

Eligibility conditions are strictly defined. The policyholder must have reached the age of 70 by 31 December 2026 at the latest. The premiums concerned must have been paid before the policyholder’s 70th birthday and before 1 October 2025. The gift must be made between 1 January and 31 December 2026. This triple temporal lock gives the scheme a truly exceptional and non-renewable character.

Strategic Implications for Substantial Portfolios

For estates exceeding €500,000, this scheme opens considerable optimisation opportunities. A couple each holding a life insurance contract could theoretically transfer up to €305,000 per beneficiary completely tax-free — €152,500 per parent — by combining this mechanism with standard gift tax allowances (€100,000 per parent per child, renewable every 15 years).

The advantages are twofold. First, early transmission allows beneficiaries to access funds immediately, at a time when they may need them most — for property acquisition, business creation, or investment. Second, the transferred sums permanently exit the donor’s taxable estate, thereby reducing the heirs’ future exposure to inheritance tax.

In France, total life insurance assets stood at approximately €1.95 trillion at end-2025, with a significant proportion held by policyholders over 70. The government estimates this measure could release several billion euros of savings into the real economy, an objective explicitly stated in the amendment’s explanatory memorandum.

Key Consideration: Deduction from the Death Benefit Allowance

The mechanism involves a critical trade-off that every wealth management adviser must highlight. The €152,500 allowance used through early transmission will be fully deducted from the equivalent allowance applicable at the policyholder’s death. In practical terms, if a policyholder transfers €100,000 to a beneficiary in 2026 through this scheme, the residual death benefit allowance on the life insurance contract will be reduced to just €52,500 for that same beneficiary.

A comprehensive analysis of the overall estate position is therefore essential before activating this lever. Several parameters must be considered: the policyholder’s life expectancy, the composition of the global estate, other available allowances (direct-line gifts, customary gifts), the tax treatment of contract withdrawals (social contributions, flat tax at 31.4% in 2026 following the CSG increase), and the reinvestment strategy envisaged for the beneficiary.

Act Before 31 December 2026

The non-renewable nature of this scheme demands immediate action. Eligible policyholders should engage now with their wealth management adviser to evaluate the merits of proceeding with early transmission. The complexity of balancing immediate tax optimisation against preservation of future death benefit allowances calls for rigorous professional guidance.

At Riviera Wealth Management, we recommend conducting a comprehensive estate audit incorporating this new fiscal development, in order to determine the optimal amount to transfer and to align this operation with our clients’ broader succession strategy.