Is Your Tax And Wealth Management In Shape For 2017?

It is that time of the year when many people make New Year resolutions to improve their life in one way or another. Whether or not you make resolutions, this is a good time to consider whether you need to review your financial planning.

To protect your financial security through retirement, and achieve your wishes for your family and heirs, you need to have a strategic tax and wealth management plan in place. This should cover your savings and investments, tax planning, pensions funds and estate planning. These should all be set up to work together to preserve your wealth over the long-term and meet your objectives.

You need to consider any recent global and local developments that may affect your finances in the coming year, as well as have a long-term strategy. Any changes in your personal circumstances could also warrant a review.

Once you have assessed your situation and financial planning, you will be able to discuss any necessary adjustments with your financial adviser.

Savings and investments

2016 was certainly an interesting year, with Brexit and US elections. More recently the Italian referendum could add more uncertainty for the Eurozone and financial markets. Diversification is more important than ever. Do you have a long-term strategic asset allocation plan specifically designed around your circumstances, needs and risk profile?

Diversification gives your portfolio the chance to produce positive returns over time without being vulnerable to any single area under-performing. There are various levels you should have in your investment portfolio –

1.  Asset allocation – spreading your capital across different asset classes (equities, bonds, real assets, property, cash etc).
2.  Diversification across geographical areas, sectors, company size etc.
3.  Owning equities and bonds issued by a range of companies (for example through owning a selection of funds).
4.  Utilising a multi-manager approach where you diversify across managers and styles.
5.  Currencies.

The starting point should be to obtain a clear and objective assessment of your appetite for risk, to make sure your portfolio is suitable for you.

Remember that as asset prices rise and fall, your portfolio can shift away from the one designed to match your risk profile and objectives. You should review your portfolio around once a year to rebalance it if necessary.

Tax planning

French tax regulation changes constantly and it pays to be on top of things. The French government’s draft budget bill for 2017 showed no change to the income tax rates themselves, but the income bands for each rate increase very slightly. For example, the nil rate band will cover income up to €9,710 (compared to today’s €9,700) and the 45% top rate will apply to income over €152,260 (up from €152,108).

Some tax reductions will be introduced for taxpayers with low income.

Another major incentive to review your tax affairs now is the global automatic exchange of information regime under the Common Reporting Standard is now in force. The French tax authority will receive information on every resident of France, without having to ask for it. Cross-border tax planning can be complex, so you need to ensure you are declaring income and paying tax in the right country. There has never been a better time to consider your tax planning and, more importantly, the use of a fully tax compliant structure in France, to ensure peace of mind.

Make sure your investments and wealth are placed in the most suitable arrangement to limit your tax liabilities. Take advice from someone who is well-versed in the nuances of French taxation, otherwise you could see your investment returns slashed by French taxes that could have been avoided or mitigated. It is important to ensure your tax planning is up-to-date and designed to take advantage of tax planning opportunities in France.

Estate planning

The first step is to establish your goals. Who would you like to benefit from your estate? Are you happy for them to have control over the money? When should they receive the funds? How much tax will they have to pay on their inheritance?

You then need to obtain specialist advice to ensure that your estate plan is specifically set up to achieve your wishes for your heirs.

Under the EU succession regulation Brussels IV that came into force in August 2015, you can now use your will to elect for UK succession law to apply to your estate, thereby avoiding France’s forced heirship. However you should take expert advice before choosing UK law as it may have indirect consequences you are not aware of.

Remember that Brussels IV does not cover tax laws. French succession tax continues to apply as it does now. You may be free to pass assets to whomever you wish, but with tax rates up to 60%, the French taxman could well be the biggest beneficiary.

Whether it is investments, tax or pension planning, seek professional advice to ensure you do what works best for your personal situation. Use an adviser who can guide you on all these aspects and provide holistic solutions so you can have peace of mind that your financial affairs are in order.

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