As we move towards the end of 2021,Brexit is no longer a novelty, but we are still learning exactly how we are or may be affected. While in many ways day-to-day life hasn’t changed for British expatriates, there are some inconveniences – some minor, some not so minor.

One Brexit consequence that is causing concern and difficulties for many UK nationals in France, is financial advice and services – we are receiving a lot of questions about it.

The Brexit trade deal did not cover financial services, which meant the previous ‘passporting’ regime came to an end on 31 December 2020.   While post-Brexit negotiations could change things in the future, you do need to establish if your financial planning – and adviser – will stand up to the challenges that Brexit brings today. Here are four key considerations.

1.     The end of passporting

If you have a good relationship with your UK-based financial adviser, you may understandably wish to continue using them, despite now living in a different country. However, you need to make sure they can legally continue to advise you now that the UK is no longer an EU member state.

Until the end of 2020, UK-based financial businesses could ‘passport’ out of the UK and into Europe – but since 1 January 2021, this no longer applies.

‘Passporting’ enables cross-border transactions between EU member states through shared financial regulation. It was previously possible because the UK Financial Conduct Authority (FCA) was bound by the same rules and standards as other regulators in the EU. Now the UK has left the EU, the regulation of financial activity and consumer protection no longer lines up on both sides. So, unless a mutual deal is agreed on financial services in future, the EU no longer permits ongoing passporting arrangements for UK financial businesses and advisers.

Some UK financial firms have put arrangements in place to be able to continue working in an EU country post-Brexit, but others have not. Many expatriates with EU residential addresses have received letters from UK banks, financial advisers and investment institutions advising that they can no longer support them.

2.     The limits of UK advice

If you still retain UK investments, a UK-based adviser may be able to continue supporting you there. But if you hold savings and investments with an EU-based institution, they may no longer accept instructions, such as top-ups, from a UK adviser. The financial regulator in France, for example, had confirmed it would be illegal for French banks and insurance firms to do business with a provider who is not authorised in the country post-Brexit. Similarly, while the Central Bank of Ireland enabled a three-year grace period for servicing existing insurance contracts, it will not allow unregulated entities to renew or create new policies from 2021.

We can expect similar positions to be taken by other EU regulators seeking to protect consumers in their country, so this could limit the planning opportunities for expatriates using UK-based advisers.

Also, check if there are any practical challenges to keeping a UK-based adviser. Do you have to travel to the UK for meetings and paperwork requirements? Consider how this would work in situations where you need funds quickly or are unable to travel through illness or travel restrictions.

3.     The advantages of local knowledge

As well as the legal and practical implications, consider whether an adviser based in a different country is best placed to help you take advantage of opportunities available to you in France. For example:

· Do they fully understand the intricacies of the French tax regime and how it interacts with UK taxation?

· Do they have in-depth knowledge of the French residence, domicile, tax, succession law and reporting rules?

· Do they know about – and have access to – tax-efficient solutions that offer significant benefits to France residents?

· Who will pay the bill or face the consequences if they get things wrong?

While UK-based advisers may be experts on the ins and outs of the UK system for residents there, it is unlikely that they have the same in-depth knowledge for another country.

4. The suitability of UK planning

Remember: financial planning that is tailored for a UK resident is unlikely to remain suitable once you become resident elsewhere. If you have not yet moved to France, review your arrangements before you do to minimise taxation when changing residency and make the most of tax-efficient opportunities in France.

If you are holding on to UK savings and investments, beware that they can lose their tax benefits once you are living abroad. And once they cease to be EU/EEA assets and you are no longer a UK resident, they could potentially attract a higher tax bill, in either or even both countries.

Meanwhile, France residents have access to locally-compliant alternatives that can offer other advantages besides tax-efficiency – such as multi-currency and estate planning flexibility – so explore your options. Depending on your circumstances, many British expatriates in France have found that reviewing and adjusting how and where they hold their capital has significantly improved their tax position.

It has never been more important to ensure your financial affairs are both compliant and suitable for your life in France. Secure financial peace of mind by talking to an experienced, locally-based adviser.

Blevins Franks Group is represented in France by the following companies: Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists. Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z. Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML.

You can find other financial advisory articles by visiting our website here

In August, France approved changes to succession law which will affect the forced heirship rules applied on French assets. It will allow children to contest a will, even if you opted for UK law to apply to your estate. This could affect the succession planning you set up over recent years.

France’s long-standing Napoleonic code was created to protect the bloodline. Children are protected heirs and must inherit 50-75% of an estate (depending on the number of children). These rules apply to your worldwide estate if you die as a habitual resident of France, and a will, even a foreign one, will be ignored if it attempts to override these reserved heirship rights.

Brussels IV
In 2015 there a welcome development for British expatriates who wish to avoid French succession laws. The European succession regulations (‘Brussels IV’) allow foreign nationals to elect for the law of their country of nationality to apply to their assets on their death, rather than that of their country of residence. Provided this election is made in their will, nationals of many common law countries (such as the UK and US) can avoid forced heirship rules and potentially choose to leave children out of a will.

France’s new succession rules for French assets
On 13 August 2021, the French Constitutional Council approved new legislation which will affect the forced heirship rules applied on French assets.

Under the new legislation, if French assets pass according to the provisions of a country which does not impose forced heirship rules – as is the case in England and Wales – the protected heirs (biological and adopted children) can make a claim for the share they would be entitled to under the French rules.

This means children could challenge the parent’s will and seek for compensation. This would even apply to estranged children who have had no contact with the parent for decades. The compensation mechanism, however, only applies to French assets.

In summary, the new rules apply where:

· the deceased individual was either habitually resident in an EU country or a national of an EU country; or

· the children were habitually resident in an EU country or nationals of an EU country; and

· the law applied in the will of the deceased individual does not include any forced heirship / protected share for his/her children.

The new legislation is likely to come into force before the end of 2021 (three months after the publication of the law) and only succession after the relevant date will be affected.

At first glance, this new legislation seems contrary to the European succession regulations which override the domestic French legislation. Therefore, there is a strong chance it will be challenged in the European Courts.

There are also outstanding questions on how the rules would apply. For example, when an election is made to apply the law of Scotland which has forced heirship rules but enables parents to disown children in some circumstances.

Does this impact you?
Many British expatriates have used Brussel’s IV to avoid France’s forced heirship rules.  Now, under the new rules, if you die as a French resident and have elected, for example, to use English law, if you do not leave your biological children a share of your estate equal to what they would be entitled to under French rules, they can potentially make a claim for their protected share of your French assets.

If you wish to retain flexibility of disposition of assets at death, it is now more important to minimise the value of the assets held in France.  If the new rules are applied on a strict basis (ignoring the European regulations), it will be more difficult to pass your French assets according to your wishes.

This should be considered very carefully when drafting wills in France. French may now not be willing to include the election to use the law of a country with no forced heirship rules.

The interaction with the Brussels IV rules is not yet clear, and it is likely to take some time to establish how the new rules are applied in practice.

Estate planning for France
Even before this development, we always recommend you should take specialist advice before using Brussels IV as electing for UK law may have consequences you are not aware of.  You also need to watch out for high succession tax rates (up to 60%) if you leave assets to distant or non-relatives.

In any case, there are steps you can take to avoid some of these problems created by France’s succession regime. If you have not yet bought French property, take personal advice before you do as matters may be sorted by simply reviewing how the property should be held. And even what some people think of as obvious answers, such as putting property in their children’s name to avoid taxes on death can have unexpected effects, including actually increasing the tax liability.

Estate planning in France is complex, with the succession law and tax regimes very different to the UK’s. But professional advice and advance planning will make things easier and give you peace of mind, and help ensure the right money goes to the right hands at the right time.

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; individuals should seek personalised advice.

Blevins Franks Group is represented in France by the following companies: Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists. Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML.

You can find other financial advisory articles by visiting our website here