Protective sacking

History

The word protective sacking comes from Lorenzo Tonti, banker Neapolitan who proposed this system with Mazarin: each subscriber pays a sum in funds and touches the dividends of the funded capital. When a subscriber dies, its share is distributed between the survivors. The last survivor recovers the capital. In the initial diagram (public loan), it was the State which recovered the capital and the protective sacking was connected with a system of life annuities (invented much later) and with a system of national Loterie. The Parliament refused to record the edict of creation proposed by Mazarin. The first tontine loan was finally created in 1689 by Pontchartrain to help with the financing of the war against the League of Augsburg. In this first tontine loan, the subscribers were divided enters 14 age groups going five years in five years; the arrears went from 5% (Classes 1 & 2) to 12,5% (Classes 13 & 14). This loan was a failure: only 5912 people subscribed to it (coming from all the classes of the company, including most modest, in particular of the servants). 12.036 " actions" were subscribed whereas 65.333 were authorized; the State accepted 3.610.800 books whereas he hoped to collect 19.600.000 books! That is to say a rate of success of 18%.

Ten tontine loans took place between 1689 and 1759, on the same principle but with some alternatives. They were prohibited by Terray, at the time of its Banqueroute, because they cost too expensive. What was exact; subscribers living too a long time! The protective sacking was largely developed with the the United Kingdom and the the United States to finance public works. Private assemblies also made their appearance. The protective sackings were prohibited in the United Kingdom and in America because, in several cases, of the participants had undertaken to liquidate the others to increase their chances to gain: it is the subject of a novel of Robert Louis Stevenson and Lloyd Osbourne, a Death encumbering ( The Wrong Box , 1889), whose Bryan Ford drew a film in 1966 as well as episode from season 7 of the series Simpson: “Large father Simpson and the cursed treasure”.

Right

The Civil code regulates “the Tontine Pact”: juridically a clause, known as also “clause of increase”, inserted in the contract by which several people buy the same good, piece of furniture or building, jointly. It provides that this good will return in freehold to the last of the survivors, after the death of all the other joint purchasers.

It is not a joint ownership which is thus organized because each purchaser is supposed to be sole owner of the good under the condition that he is the only survivor. Consequently, when all the Co-purchasers died except one, the survivor is famous to have been sole owner of the good since the day of acquisition and its joint purchasers, died before him, are supposed not to have never had anything. Technically, the tontine pact is thus an aleatory contract concluded subject to payment. Consequently, it is valid only if the chances of survival are appreciably equivalent, and if the amounts are not unbalanced too much between purchasers. In the contrary case, the pact incurs requalification in indirect Donation.

Taxation

Clause of protective sacking alone

On the successional level, there is thus no transmission between the late ones and the survivor so that it takes place there neither with application of the mode of the successions (rules of the hereditary reserve in particular) nor, in theory, of the transfer taxes on a purely free basis.

Nevertheless, taking into account the risks of diversion, the French tax authorities subject since 1980 the majority of the protective sackings to the taxation rules of the successions. The exemption is applicable only when the protective sacking relates to the principal residence common to both purchasers having a global value lower than 76.000 €. The good is juridically except succession, but the survivor will have to thus pay rights on the share collected, calculated according to the degree of relationship and the value of the share. Between boyfriends, the rate of taxation is of 60% of the credit net collected.

Clause of protective sacking in a SCI

The protective sacking relates to the shares of a SCI. With the first death, only of the transfer taxes subject to payment will be due to the rate of 5% by the survivor on the shares of which he was not owner.

This possibility is to be handled with precaution because, although confirmed since, it is resulting from an old ministerial answer former to 1980 and the tax authorities can plead the Abus right. It is advisable moreover to limit the extent of the clause of protective sacking by leaving out of the tontine pact some shares or by associating a family member of one or each boyfriend, in order to avoid the nullity of the company (which must include/understand at least two associated).

Topicality

The protective sackings live again today in a context where the banks refuse to intervene. Groups of friends, neighbors or colleagues can constitute themselves in order to propose, on the basis of of confidence, assistances to each member: the contributions of the members and refundings make it possible to finance the following projects. This system is possible because there are true social relations. In more individualized contexts, in fact the organizations of Microcrédit take over.

See too

Life annuity

External bonds

Information compiled by the United Nations

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