For an entrepreneur, the ability to plan for the future is an essential quality to stay ahead of the competition. But paradoxically, this faculty rarely finds expression when it comes to imagining one’s own death or disability. While his presence at the head of the company is essential for its smooth running.
“ In a VSE or SME, the activity is generally based on one or two heads, explains Christophe Vanhuyse, director of the Borrower department at Swiss Life. In the event of the death of the manager, the company’s activity risks declining, as well as its valuation. With key man insurance, the company will be able to receive capital to finance a headhunter to find a replacement, the balance allowing it to cope with the short-term financial consequences of the manager’s disappearance. »
This increases the chances of preserving the value of the professional assets accruing to the surviving spouse and children. This type of coverage is also of interest in the presence of employees who are essential due to their know-how, such as a nose for a perfumer or a cellar master in a wine company. Sophie Nouy, director of the heritage expertise center at Cyrus Conseil, however sees two limits to this type of contract.
“ The amount of compensation received is often limited to a few tens of thousands of euros and it is the company which receives the capital, which will be subject to corporate tax. ”, she points out. This argues, according to her, for taking out personal death insurance.
Cross guarantee between partners
In the presence of several founding partners, they can take out a cross guarantee between partners. “ This type of contract makes it possible to pay capital to the surviving partner which will be used to buy back the shares of their deceased partner from the heirs, explains Christophe Vanhuyse. This is a way to relieve them of the management of company securities.. » In this context, everyone signs a contract by designating their partner as beneficiary.
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These contracts have a tax interest
“ It is a response to the requirement for speed imposed by the situationcontinues Sophie Nouy. The capital received makes it possible to constitute a start of contribution to pay off the interest of the heirs, while the tightening of the conditions of access to credit does not facilitate the obtaining of financing for such operations. » The paid-up capital can reach, depending on the amounts contributed, from several hundred thousand to several tens of millions of euros. “ We carried out an operation for a capital of 43 million euros last year », confirms Christophe Vanhuyse, the limit being that which the reinsurers agree to cover.
“Negligible taxation”
When the founding director does not have a partner, the challenge consists rather of financing the inheritance taxes on the value of the company’s shares. “It is then more logical to designate the children in the beneficiary clause, the surviving spouse being exempt from inheritance tax, recalls Sophie Nouy. The tax debt can quickly become colossal, with a marginal tax rate of 45%, knowing that for the Public Treasury, the value of the company is that of the day before death. »
The other benefit of death insurance is fiscal in nature. “The death benefit is received with negligible taxationpoints out Sophie Nouy. Taxation is not based on the amount of compensation but on the last annual premium paid, and this sum benefits from the reduction of 152,500 euros on life insurance contracts for premiums paid before age 70. »
“Insurance for the equivalent of two years of income allows, in the event of death, to maintain the family’s lifestyle”
If the manager is an employee, he can claim the collective welfare contract taken out by the company. “This provides a first level of protection for the benefit of the family financed largely or entirely by the employerbelieves Christophe Vanhuyse. But the capital involved is generally limited. Additionally, protection stops after you leave the company unless portability [maintien temporaire des garanties, NDLR] is effective. » This justifies, according to him, the subscription of an individual contract, especially if there is a significant distortion of income within the couple.
“ Insuring the equivalent of two years of income allows, in the event of death, to maintain the family’s lifestyle and finance potentially expensive higher education, at an affordable cost, confirms Sophie Nouy. With an annual premium of 1,200 euros, the death benefit for a subscriber in good health reaches 340,000 euros at age 50 and 830,000 euros at age 40. »
Natixis headquarters in Paris.
© Photo12/Alamy/Frederic Reglain
Several arrangements to take
Legal measures can be taken by a manager to protect his spouse and/or children from his disappearance
Carry out a preliminary analysis
To prepare for the consequences of a life accident, carrying out an a priori diagnosis is essential. “It is necessary to measure the legal, economic and fiscal consequences of death by taking into account all parameters, and to model the situation of the surviving spouse”recommends Pascal Prévot, director of wealth engineering at Natixis Wealth Management.
Anticipating makes it possible to highlight income needs to finance lifestyle, possible cost centers, such as a second home destined for disuse, and to put in place appropriate legal solutions. “Marriage allows, for example, the surviving spouse to benefit from a lifetime right to housing and a right to reversion of a fraction of the pension from which the deceased benefited or would have benefited”illustrates Pascal Prévot.
Provide everything in the company’s statutes
The anticipation of a prolonged absence or disappearance of the business manager also applies to the governance of the company, to prevent the risk of blockage. “All situations can be provided for in the statutes: the rules for designating the manager who will take over, the early appointment of the future manager, the distribution of voting rights in the event of dismemberment of shares, the allocation of results between usufructuary and bare owners »explains Sophie Nouy, who recommends avoiding “false suspense” when only one successor is obvious.
A preciput clause for married couples
The surviving spouse can benefit from additional protection by inserting a preciput clause in the marriage contract or subsequently in an agreement. “It is an option offered by the Civil Code which provides the surviving spouse with the ability to take, before any sharing, certain common property, in full ownership or only in usufructexplains Pascal Prévot. This solution can be particularly recommended in cases where children have already benefited from substantial donations. »
The surviving spouse remains free to choose or not to apply this clause.
