The associated cross guarantee: anticipate the transmission of your company!

The cross guarantee is a death insurance allowing to protect the surviving partner in the event of a death, Wealth A7 explains you why this contract of providence is essential:

Why?

When you create a company, whether it is in a family context or not, it is necessary to anticipate the transmission. The associated cross guarantee can be useful in different setups! In a family SCI, the creation of a company can have an objective to reserve the assets included in the company to the surviving spouse. In the context of a company, it may be agreed that the company should remain in the hands of the surviving partners.

In these different cases, the partner and/or the surviving spouse may not have the resources to buy back the shares that will rightfully belong to the heirs. The setting up of a contingency contract from the incorporation of the company will allow the surviving partners to compensate the heirs and to keep the ownership of the company.

How does it work?

The cross-partnership insurance will be taken out as soon as the company is incorporated. Each partner can therefore take out a contract on his own life, the beneficiary of which is the other partner, but this can be flexible, the company can also take out this contract itself and organize the different guarantees.

The articles of association must of course be amended to avoid any blockage of heirs, for example, with an approval clause also covering ascendants and descendants.

Finally, a partnership agreement must be drawn up in order to determine the terms and conditions for the valuation of the shares, which will make it possible to adjust the death benefit.

Taxation

It is provided that the capital received by the beneficiary is exempt from any taxation and therefore from social security contributions. On the other hand, according to article 990 I of the General Tax Code, only the premium paid during the last year of the contract will be taxed. In the event of death before age 70, this premium will be exempt provided that it is less than €152,500 for all life insurance contracts and death contracts combined. In case of a death after 70 years old, the total of the annual premiums paid from that age onwards is taxed according to the classic transfer duties, after an allowance of 30 500€ for all life insurance contracts and death contracts combined.

The protection of the partners during the transfer of a company is an important issue in the life of a company. Wealth A7 can assist you in the constitution of your company, contact us!

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