Reviewing your financial planning to make sure it’s on track to meet your needs and protect your family’s long-term financial security in France could be an important step to take this year.
The first couple of months in the year is when many of us reflect on the last 12 months and look ahead to what the future will bring and what we can do to improve it. One key reason to review your savings and investments, tax, and estate planning is to check it is all up to date. Establish whether any tax or pensions rules or financial regulations have changed, and how the investment climate has evolved over the past year. Also, consider if any developments in your personal and family circumstances mean you should adjust previous arrangements.
Strategic financial planning achieves the best results
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 a lawyer about setting up a French will. At some point, they may wonder if they should make changes to their pensions.
For truly effective financial planning, however, you need to consider all these various aspects together. 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 hold assets can impact 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’s a summary of three key areas you should consider in your financial planning review.
French residency and taxation
The fact that you’re resident in France, rather than the UK, has a significant impact on your financial planning.
Regardless of how effective your tax planning in the UK was, you pretty much need to start afresh with financial planning for France. What was tax efficient across the Channel is unlikely to be tax efficient here. Explore the compliant arrangements that provide tax benefits in France. The assurance-vie savings vehicle, for example, can provide a range of advantages that go beyond lowering your tax bill.
Being a French resident can offer tax advantages, for example, if you’re in a position to safely take your entire pension as a lump sum. While you’re no longer eligible for the UK’s 25% tax-free lump sum, some people can limit taxation on the whole amount to just 7.5% (with a 10% allowance). This may be possible if your contributions were paid to a contributory scheme and if, after withdrawing a lump sum, you cannot take another capital lump sum from the fund.
Pension income and lump sums are also subject to 9.1% French social charges, but these do not apply if you hold Form S1.
Estate planning for France
Don’t leave estate planning to the final stage of financial planning. The way you own property and investments in France impacts how you can distribute your assets on death and how much tax your beneficiaries pay. So, consider this early on when buying assets and setting up investment arrangements.
Financial structuring for living 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 don’t already have a strategic financial plan in place, you may need to take a completely fresh look at all your savings and investments and consider if they are suitable for you today. 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’re easier to manage?
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. Establish how best to hold your investments so they can easily, and tax-efficiently, pass to your chosen beneficiaries on death. Some assurance-vie allows 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.
Financial planning for France
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’ve covered everything, and that making one financial decision will not have unexpected consequences on another, take expert, professional advice from Blevins Franks.
Contact us today.
