Manifestly excessive premiums (French life insurance)

Under French law, a life insurance benefit paid to the named beneficiary is not subject to the rules on bringing gifts back into the estate nor to reduction for infringing the forced heirship share: article L. 132-13 of the Insurance Code sets this as the principle. This is what allows a person to favor someone without the children being able to challenge it. The same article sets the exception: these rules apply to sums paid by the policyholder as premiums when they were manifestly excessive in light of the policyholder's means. Case law, notably the mixed chamber of the Court of Cassation in 2004, clarified the method. Excessiveness is assessed at the time of each payment, not at death, taking account of the policyholder's age, financial and family situation, and the usefulness of the contract to the policyholder. A large payment made by an elderly person shortly before death, devoting most of his or her wealth to a third party, will more readily be judged excessive than a regular payment drawn from income. The sanction applies only to the excessive premiums, not to the whole contract. For the adviser, it is a limit on using life insurance to get around forced heirship, and a source of family litigation.