Strategic Financial Planning for the New Year
By Rob Kay - Senior Partner Blevins Franks
Of course, you can review your financial planning any time to ensure it is on the right path, but the New Year is the perfect prompt to do so if you have not taken a fresh look at it for a while. And perhaps it is even more important this year as we navigate a post-Brexit world.
One key reason to review your wealth management is to ensure it is up to date. Establish whether any tax rules or financial regulations have changed, and consider if developments in your personal and family circumstances mean you should adjust previous arrangements.
But an effective review of your financial planning, to ensure it is suitable for your life in France and your wishes for the future, needs to go beyond that.
The benefits of strategic planning
Many people only consider segments of their finances at a time. They may have bought shares in companies they like and/or invested in funds recommended by a financial adviser years ago. They may speak to a tax accountant to learn about French taxation and perhaps ask about tax planning opportunities. Then they speak to a lawyer about setting up a French will. At some point they will look at their pension funds and try and work out how best to access their retirement savings.
For truly effective financial planning, however, you need to consider all these various aspects together. For example, how you hold your investments can make a difference to your French tax liabilities. Estate planning in France is no simple matter, with its complex succession tax regime and forced heirship rules, and how you own assets can impact on what you can achieve. And when deciding what to do with your pensions, look at all your retirement savings and what income they can generate for you.
Here is a summary of three key areas you should consider in your financial planning review.
French residency and taxation
The fact that you are resident in France, rather than the UK, has a significant impact on your financial planning. First of all, make sure you know where you are resident for tax purposes, especially if you are new to France or spend time in both countries. The French and UK tax residence rules can be more complex than first meets the eye. The double tax treaty determines where you pay tax if you are resident in one country and earn income in the other.
Regardless of how effective your tax planning in the UK was, you pretty much need to start afresh in France. What was tax efficient across the Channel is unlikely to be tax efficient here. Have you explored all the compliant arrangements that provide tax benefits in France? Assurance-vie, for example, can provide a range of advantages that go beyond lowering your tax bill.
Estate planning
Do not leave estate planning to the final stage of financial planning. The way you own property and investments in France makes a difference to how you can distribute your assets on death and how much tax your beneficiaries pay. So take this into consideration when buying assets and setting up investment arrangements.
Succession law in France protects children over your spouse. This can have unwelcome consequences for families with children from previous marriages, unless you plan ahead. UK nationals can use the EU regulation – ‘Brussels IV’ – to distribute their estate under UK law, but do research this first as it may not be the best solution for you.
Financial structuring for life in France
Perhaps the key rule for financial planning is that it must be specifically structured around your personal circumstances – your lifestyle today and plans for the future, family situation, income requirements, objectives, time horizon and risk tolerance.
If you do not already have a strategic financial plan in place for France, you may need to take a completely fresh look at all your savings and investments and consider if they are suitable for you today and the current economic climate, for example:
Are they too risky?
Do you have adequate diversification?
Can they provide income without risking the capital?
Could you consolidate shares and funds so they are easier to manage?
Tax liabilities
And, at the same time, consider your tax liabilities on investment income and gains and whether you could use alternative tax-efficient arrangements to hold your investments. And how will these savings be passed to your heirs? What inheritance taxes will they have to pay? Can the funds be passed on directly or will there be a lengthy probate process?
Some assurance-vie allow you to hold your choice of investment assets while providing tax and estate planning benefits. There are various ones available so choose the one that works for you.
Securing the best results
Every family is different. Your strategic financial planning must be carefully designed for you. All the various aspects should work cohesively together to create an overall wealth management plan that provides long-term financial security for yourself and achieves your wishes for your heirs.
For peace of mind that you have covered everything, that you have understood the intricacies of French taxation and not missed out on tax planning opportunities, and that making one financial decision will not have unexpected consequences on another, take expert, professional advice, ideally from a locally based cross-border wealth management specialist. If you still use a UK-based financial adviser, confirm that they can continue to provide services to you in France after Brexit. And as is always the case, your adviser should take the time to get to know you to then outline personalised recommendations for you.
The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.
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