For many French nationals living in the United States, life insurance is still associated with a savings product, similar to what they are familiar with in France. However, the American system is based on a completely different logic.
In the United States, life insurance is a protection tool that can help provide families a death benefit, however some policies can be provide additional benefits like a wealth transfer tool: it can be a true wealth planning lever that can combine protection, capital growth, and tax optimization.
Often misunderstood or underutilized, it nonetheless represents a strategic opportunity for French expatriates, whether they remain in the United States or leave.
1. A structure very different from France
In France, life insurance is primarily a savings product, benefiting from favorable taxation on gains and transfers.
In the United States, there are mainly two types of policies:
- Term Life Insurance: pure death coverage, with no savings component.
- Permanent Life Insurance (Whole Life, Universal Life, Indexed Universal Life): life insurance that includes a cash accumulation component.
- These permanent policies allow the accumulation of a “cash value” (surrender value), which evolves over time.
According to the Internal Revenue Service (IRS), these U.S. life insurance policies may benefit from tax-deferred growth, as long as the funds remain within the contract
Source : https://www.irs.gov/publications/p525
2. A tax-advantaged capital accumulation tool
One of the main advantages of U.S. life insurance lies in its tax treatment:
- Gains are not taxed as long as they remain within the policy (tax deferral).
- Withdrawals can be optimized from a tax perspective through policy loan mechanisms.
- The death benefit is generally paid out free of federal income tax to beneficiaries.
- According to the IRS, death benefits from a life insurance policy are generally exempt from income tax for beneficiaries
Source : https://www.irs.gov/taxtopics/tc403
This framework makes it possible to structure a long-term strategy, combining growth and transfer.
3. A multifunctional wealth asset
Unlike the French perspective, U.S. life insurance can play several roles in a wealth strategy:
- Family protection: payment of capital upon death.
- Capital accumulation: gradual growth of the surrender value.
- Source of liquidity: ability to borrow against the policy value.
- Wealth transfer tool: transfer of assets within an optimized tax framework.
According to LIMRA (Life Insurance Marketing and Research Association), permanent policies are widely used in the United States in wealth planning and estate planning strategies, particularly for transfer and liquidity management.
Source : https://www.limra.com/en/research/research-abstracts-public/2023/life-insurance-ownership-study/
4. Often overlooked accessibility
Contrary to common misconceptions, it is not necessary to be a U.S. citizen to subscribe to a policy.
Insurers generally accept:
- U.S. tax residents,
- work visa holders,
- green card holders,
- and certain profiles with economic activity in the United States.
However, access conditions and structuring must be carefully reviewed, especially in a Franco-American context.
5. Key considerations for French expatriates
U.S. life insurance offers advantages but requires careful implementation:
- Understanding of the policy: fees, conditions, type of support.
- Tax coordination: interaction with French taxation in case of return.
- Long-term horizon: these products are designed to last over time.
- Overall structuring: integration with other assets (401(k), real estate, brokerage accounts).
- Without proper guidance, misuse can reduce the expected benefits.
Conclusion
U.S. life insurance is much more than an insurance product: it is a strategic wealth management tool.
For French expatriates, it can help effectively structure their assets, provided it is integrated into a global and cross-border approach.
At USA France Financials Group™, we support our clients in analyzing and implementing tailored solutions, taking into account the tax and wealth-specific aspects between France and the United States.
Alexandre Quantin, MBA, RICP® - Partner, USA France Financials Group™
Future written communications may be in English only. The primary purposes of life insurance is the death benefit. With whole life insurance the payment of the required guaranteed premiums, you will receive a guaranteed death benefit and guaranteed cash values inside the policy. Whole life insurance should be considered for its long-term value. Early cash value accumulation and early payment of dividends depend upon policy type and/or policy design, and cash value accumulation is offset by insurance and company expenses.Compliance Code8899072.1