For many expatriates living in France, one of the most frequently mentioned financial products is Assurance Vie, a French assurance vie and life insurance product. While often translated as “life insurance,” Assurance Vie is far more than a simple policy that pays out upon death. In fact, it is a versatile investment product that combines the features of a life insurance product with flexible investment opportunities. It is one of the most popular and tax-efficient ways to save, invest, and pass on wealth in France. Yet for expats, it can seem confusing at first glance. This guide explains how Assurance Vie works, why it is so widely used, and what you should consider before opening one.

What is Assurance Vie?

Assurance Vie is a long-term investment contract offered by French insurance companies. At its simplest, you pay money into the policy, and that money is invested in a wide range of funds, bonds, equities, or secure options depending on your chosen strategy. Assurance vie products can be tailored for expatriates, with international offerings that provide features such as English language documentation and access to diversified investment choices across global markets. Over time, your savings can grow, and you can make withdrawals or leave the balance to your beneficiaries.

Unlike standard savings accounts, Assurance Vie is highly flexible. It is used for retirement planning, wealth management, tax optimisation, and inheritance planning. The policy’s performance depends on the underlying investments selected within the contract, which determine the potential returns and risk profile. Expats can choose to pay regular premiums or make lump-sum contributions, depending on their financial goals.

Why is Assurance Vie so popular in France?

For French residents and expats alike, Assurance Vie remains the cornerstone of financial planning. Its popularity is driven by three main benefits:

1. Tax advantages: Withdrawals after eight years benefit from preferential tax treatment. Inheritance planning is also extremely favourable, as significant sums can be passed on free of French inheritance tax, and expats can often benefit from preferential rates for wealth transfer and succession planning.
2. Flexibility: You can choose the investment profile that matches your risk appetite. Conservative savers may prefer euro funds with capital guarantees, while others may select equity-based funds for higher growth potential.
3. Estate planning: One of the most attractive features is the ability to nominate beneficiaries directly, bypassing French forced heirship rules in certain circumstances.

Is Assurance Vie worth it for expats?

The short answer is usually yes, but it depends on your personal circumstances. For expats moving to France, and for expats living in France, Assurance Vie offers an efficient way to invest in euros, gain access to tax relief, and manage cross-border inheritance, with specific benefits available to expatriates regarding tax advantages and estate planning.

Questions like “Is Assurance Vie better than insurance?” or “Is Assurance Vie a legitimate product?” are common. The truth is that while it is sold by insurance companies, its purpose goes far beyond traditional insurance. It is effectively a tax wrapper for your investments, which is why many wealth managers encourage expats to consider it. Consulting an independent adviser can provide unbiased guidance when selecting the right Assurance Vie, ensuring your interests are prioritized. Additionally, Assurance Vie can support long-term investment growth for expats by maximizing returns through tax advantages and compounding over time.

However, as with all financial products, it must be set up correctly. The provider you choose, the funds within the contract, and your residency status can all affect how beneficial it is.

What is the tax rate on Assurance Vie?

One of the biggest reasons expats turn to Assurance Vie is tax efficiency, particularly due to favorable assurance vie taxation rules. Understanding the tax rules is essential to optimize your investment returns.

Here are the basics:

• Withdrawals in the first 8 years: Subject to standard income tax and social charges. When you make a withdrawal, only the capital gains portion (the gain element) is taxed, not the full amount withdrawn. The gain element is calculated proportionally based on the growth of your investment.
• After 8 years: You receive an annual tax-free allowance on withdrawals (€4,600 for individuals, €9,200 for couples) and lower tax rates thereafter. Capital gains realized after 8 years benefit from these tax allowances, further reducing your tax liability.
• Inheritance tax: For sums invested before the age of 70, each beneficiary can inherit up to €152,500 free of French inheritance tax. Above this, a flat rate of 20 percent applies (and 31.25 percent above €700,000).

When you make partial withdrawals, only the gain element is subject to tax, and you only pay tax on the gains, not the total amount withdrawn. Providers often supply a detailed tax breakdown to help you understand your tax liability and plan withdrawals efficiently. Tax allowances play a key role in reducing the taxable amount from assurance vie policies.

This makes Assurance Vie a highly efficient estate planning tool compared with holding cash or other investments directly, especially when you understand all applicable taxes for withdrawals or inheritance.

How do I choose an Assurance Vie provider?

Not all Assurance Vie contracts are equal. Expats should carefully consider the following when selecting a provider:

1. Reputation and security: Choose an insurance company that is financially strong and regulated.
2. Investment range: Some assurance vie products offer access to a wide variety of fund types, including international options such as equity, bond, and global funds, while others only provide basic funds.
3. Charges and fees: Costs vary widely between providers and can eat into returns over time.
4. Language and support: As an expat, it is essential to work with a provider or adviser who can explain the contract clearly in English and understands cross-border issues.

Some providers do not impose exit penalties, offering greater flexibility for expats.

International financial advisers can often provide access to providers better suited for expats than those available directly on the high street.

Assurance Vie Providers in France

When it comes to choosing an assurance vie provider in France, expats and French residents are spoiled for choice. The market includes major French banks, established insurance companies, and independent financial advisers, all offering a variety of tax-efficient investment products. Each assurance vie provider brings its own strengths, from broad investment options to specialized support for international clients.

Selecting the right assurance vie provider is about more than just comparing fees. Reputation, transparency, and the range of available investment options are crucial factors. Leading French banks such as BNP Paribas, Société Générale, and AXA are well-known for their assurance vie offerings, but as they often promote their own in-house investments or a limited range, they may not provide the best value for money. Independent advisers, by contrast, can access exclusive products tailored to expats’ unique needs.

A good assurance vie provider will offer clear information on costs, flexible investment choices, and dedicated customer service to help you navigate the complexities of French tax rules. Since your personal circumstances and financial goals are unique, it’s wise to consult a financial adviser who understands both the local market and the needs of expats. This ensures you select an assurance vie that is truly tax efficient and aligned with your long-term investment strategy.

How does French life insurance differ from Assurance Vie?

This is a common source of confusion. Traditional French life insurance pays a lump sum if the insured person dies. In contrast, Assurance Vie acts as both an investment account and an estate planning tool. While it includes a death benefit element, its primary purpose is long-term savings and inheritance optimisation. Some Assurance Vie contracts can also be structured to preserve or guarantee the capital value of the investment, offering additional security for risk-averse investors.

How do expats use Assurance Vie in practice?

Examples of how expats typically use Assurance Vie include:

• Building retirement savings in a tax-efficient manner.
• Investing euros rather than leaving money in a low-interest bank account.
• Passing on assets to children or other beneficiaries with reduced inheritance tax.
• Diversifying investments across funds, bonds, and equities.
• Accessing tax efficient investments as part of a diversified portfolio, helping to protect wealth and provide stability during economic fluctuations.

For those holding assets in both the UK and France, Assurance Vie can be structured to complement other international products such as an International SIPP or General Investment Account (GIA).

Assurance Vies and Inheritance

Assurance vies are a powerful tool for inheritance planning, especially for expats and French residents looking to optimize the transfer of wealth. One of the key benefits of assurance vies is their preferential treatment under French inheritance tax law. Unlike many other assets, assurance vies allow you to pass on significant sums to your chosen beneficiaries with a generous tax free allowance, up to €152,500 per beneficiary. Amounts above this threshold are taxed at rates that are typically lower than standard inheritance tax, making assurance vies an attractive option for those seeking to minimize the tax burden on their heirs.

Another advantage is the flexibility assurance vies offer in estate planning. They can be structured to bypass French forced heirship rules, giving you greater control over who receives your assets. This is particularly valuable for expats with complex family situations or those wishing to provide for non-relatives or civil partners.

Understanding the tax benefits and implications of assurance vies is essential for effective estate planning. By incorporating assurance vies into your financial strategy, you can ensure your wealth is passed on efficiently, with maximum tax advantages for your loved ones.

FAQs – Assurance Vie Explained for Expats

Does Assurance Vie include tax? Withdrawals may be subject to income tax and social charges, but the preferential system after eight years and inheritance benefits make it highly tax-efficient. Assurance Vie can also help expats save money through these tax advantages.

What is the minimum amount to open an Assurance Vie? This varies between providers, but it can start from as little as a few thousand euros.

Can I access my money at any time? Yes. Assurance Vie is flexible, and withdrawals are possible, although tax treatment will depend on how long the policy has been in place.

Do I pay VAT or social charges on Assurance Vie? Social charges may apply on certain investment gains, but not VAT.

Is Assurance Vie safe? Funds are held with regulated insurance companies in France, and euro funds often carry a capital guarantee. As with any investment, risk depends on the chosen strategy.

Are there any withholding taxes on Assurance Vie for expats moving between countries? Withholding taxes may apply when moving between countries, depending on the tax treaties in place and the source of income or gains from your Assurance Vie. These taxes are deductions made by a country on certain types of income, and their impact can vary based on your residency status and local regulations. It’s important to consult a tax advisor to understand how withholding taxes might affect your Assurance Vie when relocating internationally.

Conclusion

For expats in France, Assurance Vie is more than just life insurance. It is a versatile tool for saving, investing, and inheritance planning. With careful selection of provider and investment strategy, it can provide both tax advantages and financial security.

Take the next step

At Harrison Brook, we specialise in helping expatriates make the most of their finances in France. If you are considering opening an Assurance Vie, or want to review your existing savings and investment strategy, speak to one of our advisers today.