Opening a life insurance policy for your minor child is an excellent initiative to build up a nice nest egg for them and thus give them every chance of getting off to a good start in working life. But sometimes keeping a minimum of control over the use of these savings can be a lifesaver for your child. Indeed, the sums placed in a life insurance policy for minors are in principle available to the child from the age of 18, an age when maturity is sometimes lacking to manage a substantial volume of savings.
What is the joint agreement for life insurance?
The additional pact is a contractual document intended to specify the operation of a transmission (manual gift, inheritance, etc.). In other words, the additional pact makes it possible to attach contractual obligations to a donation weighing on the donee (the one who receives the donation), in particular for the use of the sums received.
What is the point of the additional pact in the context of life insurance for minors?
So that you understand how the supplementary pact works and its usefulness in the context of life insurance, it is appropriate to briefly remind you of the principle of life insurance for minors.
How life insurance for minors works
Life insurance for minors is similar in every way to traditional life insurance, with the only difference being that it is taken out by a minor child. The latter does not normally have the right to contract, so the initiative falls to his parents who, depending on his age, must or must not obtain his agreement.
Similarly, payments made on a life insurance policy for minors do not come from the child’s resources (unless the child works or receives an inheritance), but mainly from donations from family members. Of course, parents have a right of administration over the child’s assets so that they can make payments on the life insurance themselves, but what about other donors?
The Additional Pact to Constrain the Use of Life Insurance Funds
Some donors, other than parents, sometimes want to have their say on the use of donations (mandatory payment into minor life insurance) and the conditions for withdrawal when the child comes of age.
Also, once the child becomes an adult, the parents lose the right to administer the child’s property. In this sense, the child can dispose of it freely. However, as parents, you may want the savings to be used to finance a specific life project (purchase of a main residence, financing studies, etc.) and not left at free disposal.
This is where the additional pact complements life insurance!
Goodvest Advice: Would you like to set up a Supplementary Pact with your Goodvest Kids life insurance? Our advisors are available to answer your questions and support you in your efforts!
What are the possibilities offered by the supplementary pact for life insurance?
Thus, the additional pact can be adapted to different scenarios depending on the wishes of the donee. Taking the form of a clause, it is then possible in particular to keep and/or condition the use of the sums given until the donee reaches the age of majority or even to postpone the age of free disposal.
The legal administration waiver clause for donors other than parents
As we mentioned above, parents have a legal right of administration over their child’s assets. When they are the donees, no worries, they are responsible for the use of the sums until the child turns 18.
But what about other donees (uncles, aunts, grandparents, friends, etc.)?
The latter can very well open a life insurance policy for minors without necessarily wanting the parents to be able to choose the use of the donation made for various reasons.
In this situation, it is then possible to provide for a legal administration waiver clause for the donated sums. The donor can thus appoint another person or himself to administer the minor life insurance contract in which the donation was placed.
The temporary inalienability clause to control the use of donated funds
To address the problem of misuse of the donation when the child comes of age, it is possible to add a temporary inalienability clause to the supplementary pact.
The aim of this clause is to block the use of the life insurance capital until the donee reaches the age of 25, an older age at which the latter would theoretically have completed his studies in order to buy his home, for example.
Please note that to be valid, the temporary inalienability clause must be justified by a serious and legitimate interest such as the purchase of a home, for example.
The clause conditioning the use of the donation
The additional agreement may provide for how the sums are used. The clause may initially provide that the sums given must be placed in the minor’s life insurance contract, then, in a second step, set conditions for the reuse of the donation.
The clause can thus provide that the donation can only be used for the purchase of housing and/or to finance the donee’s studies.
Goodvest advice: Do you want to open a life insurance policy for a minor and add a supplementary agreement? At Goodvest, in addition to offering you eco-responsible life insurance for minors, we can advise you, based on your requirements, on the right clauses to include in your supplementary agreement. By investing in sustainable products while making the use of savings responsibly, you are giving your child every chance to grow up in a pleasant world to live in with a nice nest egg to get off to a good start!
Exemption from reporting for direct line donations
In France, it is theoretically impossible to disinherit one’s children. To prevent assets from being squandered through donations in disregard of the heirs’ rights, all donations made are included in the deceased’s estate assets to carry out equitable distribution by the rules of succession.
However, each person can freely allocate part of his or her assets to another by donation or will. This is the disposable portion.
In the context of a direct line donation (parent-child), it is possible to provide for a reporting exemption clause in the joint agreement so that donations are not considered an advance on inheritance. In other words, the donation reduces the donor’s disposable portion (provided that it does not exceed the legally provided proportion). In the absence of this clause, the donation will be deemed to be an advance on inheritance.
What is the formalism of the adjunct pact?
The supplementary pact is a relatively simple contract to establish, we nevertheless advise you to call upon a professional to supervise you and check its validity.
Here are some elements to help you establish your assistant pact.
A private contract
A supplementary pact is a private contract that must be made in writing (for proof purposes), signed by the donor and the donee. It is then not necessary to make a supplementary pact before a notary.
In order to avoid the risk of disputes, it is preferable to sign the attached pact after the donation and to write it in the past tense with the title “Recognition of the manual gift made on…”.
Optional registration of the joint agreement with the tax authorities
Unlike the deed of gift, the supplementary pact is not subject to mandatory registration. If you wish to increase the legal security of the latter, you can nevertheless have it registered with the tax office.
For the same purposes, you can also opt for the notarial deed and designate the notary as guarantor of the proper execution of the clauses stipulated in the attached agreement.
Practical case: the additional pact with Goodvest Kids life insurance
Let’s imagine that Marie and Thomas want to open a life insurance policy for their son Jules, aged 10, as part of the Goodvest Kids offer. Not only do they want to build up solid savings for his future studies or the purchase of his first home, but they also want to ensure that these savings will be used responsibly. To do this, they decide to add a supplementary pact to the initial donation.
Step 1: Opening Goodvest Kids Life Insurance
Marie and Thomas choose an eco-responsible life insurance policy with Goodvest, favoring sustainable investments that are in line with their values. They decide to make an initial donation of €10,000, an amount that should grow by the time Jules comes of age.
Step 2: Setting up the assistant pact
To prevent Jules from having free access to the money at age 18, when he may not yet be mature enough to manage a large sum, Marie and Thomas include a supplementary pact. This document stipulates that Jules will not be able to withdraw money from the contract before he turns 25, except for specific needs.
For example, the pact includes a clause that allows Jules to use the savings only to finance his university studies or to buy his first main residence. Thus, even after Jules comes of age, Marie and Thomas retain some control over the use of these savings.
Step 3 Security and flexibility
The additional pact also allows Marie and Thomas to appoint an administrator to manage the life insurance in the event of their premature death. They choose to appoint a trusted relative, thus ensuring that the management of the contract will be ensured by their wishes until Jules is mature enough to take over.
Expected results
Thanks to this combination of Goodvest Kids life insurance and the additional pact, Marie and Thomas are confident about Jules’ financial future. They have not only built up sustainable savings but also secured its use for concrete and responsible projects.