Civil versus fiscal
A life insurance policy with a named beneficiary sits outside the estate: the payout goes directly to that beneficiary and is not part of the assets. The other heirs have no claim.
For inheritance tax it is different. The payout is taxed as a receipt by the beneficiary, just like an inheritance. The Belastingdienst adds the payout to the beneficiary's other receipts and applies that beneficiary's rate and exemption.
When taxable, when not?
The payout is taxable when:
- the deceased was the policyholder;
- the deceased paid the premiums;
- or the payout is triggered by the deceased's death.
These conditions usually apply, but exceptions exist.
The payout is not taxable when:
- the beneficiary paid the premiums themselves, even though the deceased was the insured life;
- the policy is a crossed-policy structure (partners insuring each other's lives, each paying their own premium);
- the payout falls under the gift regime instead of the inheritance regime.
A tax advisor or notary can read a policy and tell you which regime applies.
Pension imputation
For a partner receiving a survivor's pension or annuity, the partner exemption is reduced by half of the capitalised value of that benefit. We call this pension imputation. Our partner exemption guide.
Practical: requesting the policy
For each policy ask the insurer for:
- the date of death used;
- the paid or pending payout amount;
- the policyholder and beneficiary;
- the premium split (who paid what).
Include the policy in your tax filing. Forgetting a policy is a common pitfall.