Insurance in Estate Inventory
· 2 min read
Investigating insurance policies
For the estate inventory, all of the deceased's insurance policies must be investigated: life insurance, savings insurance, investment insurance, and property insurance. Insurance certificates are often found among the deceased's documents, and insurance premiums are visible in bank statements. FINE Insurance and Financial Advisory's personal insurance information service can be used to investigate the deceased's life insurance policies. The employer should be asked about group life insurance and other employment-related insurance.
Balance certificates are requested from all insurance companies, showing the insurance values and any benefits on the date of death.
Life insurance and death benefit insurance
Life insurance pays a death benefit to named beneficiaries or the estate. The beneficiary designation determines who receives the benefit. If a named person is the beneficiary, the benefit is not part of the estate's assets but the beneficiary's personal property. The benefit is nevertheless reported in the deed. Group life insurance is insurance arranged by the employer or trade union that compensates close relatives in case of death. The EUR 35,000 tax exemption under Section 7a of the Inheritance and Gift Tax Act applies to close relatives.
Savings and investment insurance
The value of savings and investment insurance on the date of death is reported in the deed. The insurance surrender value is decisive and is obtained from the insurance company. If the insurance has a beneficiary designation, the benefit is paid to the beneficiary. Without a beneficiary designation, the insurance belongs to the estate. The yield portion of the insurance is capital income subject to income tax. The capital portion is subject to inheritance tax. Capitalisation agreements are treated similarly.
Taxation of insurance benefits
Under Section 7a of the Inheritance and Gift Tax Act, life insurance benefits are partially tax-exempt for close relatives. The tax-exempt portion is EUR 35,000 per beneficiary, and for the spouse, half of the combined amount of the benefit and EUR 35,000. The tax exemption does not apply to non-close relatives. Income tax is paid on the yield portion of savings insurance before calculating inheritance tax. No tax exemption applies to benefits paid to the estate, and the benefit is added to the estate's assets in full.
Property insurance
Property insurance, such as home insurance, vehicle insurance, and travel insurance, does not usually produce assets reportable in the estate inventory. However, they should be kept in force during the estate administration period to protect the property. Home insurance should be maintained until the property or apartment is sold or transferred to the heirs. Insurance premiums are estate expenses. If the deceased was entitled to a property insurance benefit, for example from an accident, it is reported as estate assets.
Frequently asked questions
How is a life insurance benefit reported in the estate inventory?
A life insurance benefit is reported in the deed differently depending on who receives it. If the benefit is paid to a named beneficiary, it is not part of the estate's assets, but it is reported separately in the deed as the beneficiary's income. If the beneficiary is designated as 'next of kin' or 'the estate', the benefit is part of the estate's assets. The taxation of the life insurance benefit depends on the amount and the beneficiary's relationship to the deceased. Under the Inheritance and Gift Tax Act, close relatives have a EUR 35,000 tax-exempt portion.
Is a life insurance benefit taxable?
A life insurance benefit is partially taxable in inheritance taxation. Under Section 7a of the Inheritance and Gift Tax Act, EUR 35,000 per beneficiary is tax-exempt from insurance benefits paid to close relatives. The surviving spouse's tax-exempt portion is half of the combined amount of the benefit and EUR 35,000. Close relatives include the spouse, children, the deceased's parents, and other heirs. The tax-exempt portion does not apply if the beneficiary is not a close relative — in that case, the entire benefit is subject to inheritance tax.
How is savings insurance handled in the estate inventory?
The savings insurance value on the date of death is reported in the deed. If the savings insurance has a named beneficiary, the benefit is paid directly to the beneficiary and does not belong to the estate's assets. The benefit paid to the beneficiary is nevertheless reported in the deed. The savings insurance surrender value on the date of death is decisive and is obtained from the insurance company's balance certificate. Income tax is levied on the yield portion of the savings insurance, and the capital portion is subject to inheritance tax.
How can I find out about the deceased's insurance policies?
The deceased's insurance policies can be investigated in several ways. First, check the deceased's documents for insurance certificates and bank statements for insurance premiums. FINE Insurance and Financial Advisory maintains a personal insurance information service where estate shareholders can inquire about the deceased's life insurance policies. It is also worth asking the employer about group life insurance and other employment-related insurance. Additionally, trade unions provide group life insurance to their members, and information can be obtained from the union.
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