Viewing posts categorised under: Succession Planning

Health, Wealth and Happiness

By Victoria Lewis
This article is published on: 12th April 2020

12.04.20

During the current lockdown in France, I have seen a noticeable increase in the number of my clients wishing to review the beneficiaries of their investments. This could have been prompted by the daily depressing news of covid-19 deaths around the world, or it could simply be because of the extra time available to get their financial plans in order – working through the ‘to do’ lists.

Whatever the driver behind these reviews, it is a responsible part of financial planning to think about how and to whom you wish your investments to be distributed after your passing.

Inheritance planning is a key feature of the well documented ‘assurance vie’ in France – a simple and efficient investment vehicle available to French tax residents. In the next article I will remind you of the assurance vie benefits.

For the moment, I will focus on the title of this ezine. As a Financial Advisor, I am clearly not in a position to advise you on health matters. But as it happens, during this covid-19 confinement period, my own personal health has come under review! With the extra time I now have as I am not travelling to see my clients face to face, I have been able to spend 20 mins every morning exercising via an online personal coach. I will to continue this when normal life resumes.

I am, of course, able to help you with your wealth matters; and it does matter. Perhaps during this time of global lockdown, we can all reflect on our financial plans. Should I change my spending habits? Could I afford to retire earlier than planned? How can I stay financially motivated given the financial and economic forecasts? We can all lose focus from time to time, but it’s a financial adviser’s role to help you keep focused and to bring your financial plans back on track.

Please use your spare time constructively – why not contact me for a review, either over the telephone or via a video call. We will discuss many different areas such as life insurance, pensions, savings and investments, inheritance and wills, mortgages and education fees. We do not charge you a fee for our discussions, our follow up work, our regular reviews or our reports and you are under no obligation to follow our advice. Simply put, if you agree with my recommendations and I then arrange for you for example, an assurance vie or a pension, we are then remunerated by the companies we recommended.

When the daily news is worrying, it is understandable to get absorbed about the here and now impact. We are, after all, thinking about things like the latest restrictions, food shopping and how to keep the family occupied. However, when it comes to your financial plans, it is really important to stay focused on your key objectives.

I believe that if you have your health, an abundance of family and friends, a plan for your wealth then happiness will naturally follow.

To discuss further, please contact me on 06 62 50 70 21 or email Victoria.lewis@spectrum-ifa.com

Guardianship for your Children

By Katriona Murray-Platon
This article is published on: 11th April 2020

11.04.20

Being the mother of two small children and the aunty of several more, like many parents, the issue arose quite early of what would happen to my children if something were to happen to my husband and I and what would happen to my sisters’ children should something happen to them. Whilst I don’t need to make a will from an inheritance tax point of view, because I have two children with the same father (my husband) and French law states that my half of our assets would go to my children as bare owners (nu propriétaire) and my husband as beneficiary (usufruitier), I do need to make a will regarding my wishes for my children’s guardian.

The first question is a personal one. Who, in your family or friends, would be best placed to be able to raise your children, in the country you want them to be raised in, in their language, in the way you want them to be raised? Do(es) this person(s) have children of their own? There are a range of different questions that are all particular to your situation. If you intend to appoint someone to be a guardian, then you should talk to them about it and maybe, if possible, talk to your children about it.

The second issue is the legal aspect. There are two ways to appoint a guardian in France. Firstly, you can appoint them in your will, or you could appoint them using a special declaration. Either way a notary needs to be involved. If no guardian is appointed by the parents, under aged children will be put under the protection of the court. A “Family council” will be appointed by the Guardianship Court (Juge des tutelles). This Family Council, made up of a minimum of 4 people, will have the responsibility of appointing a guardian (if one hasn’t already been appointed) who can be a member of the family or someone outside the family. Even if a guardian has been appointed but this person is unable to either adequately care for the child or properly manage the child’s assets, the matter can be referred to the court and another family member can chose another guardian.

If a child loses one parent then it is the other parent who will have parental responsibility. This parent can either care for the child themselves or appoint a guardian, who can be a member of the family or a close friend. If the parent is unable or incapable of looking after the child, then another guardian can be appointed by the court.

The third aspect is the financial aspect. If something were to happen, would the guardian have the financial means to look after the child(ren)? One thing you can do is make sure you have life insurance (called death insurance in France) which will pay out a lump sum and/or an annuity to the children for the rest of their childhood. Often when you purchase a house there is loan insurance that will cover some or part of the value of the house upon death of one or both parents. However, it may not be convenient or possible for the child to be raised in the family home and property as an asset is difficult to manage. Other liquid assets can be kept in bank accounts like Livret As or LLDs, but large lump sums (like the proceeds of a house or the lump sum from insurance upon death) should be placed in an assurance vie in order to protect it from inflation.

Luckily it is uncommon that a young child would lose one or both parents, but it is something that plays in the back of the mind of many parents so it is better having things in place to decide, who, how and with what means someone would look after your child in the best possible way.

Save Thousands in Gift and Inheritance Tax in Spain

By John Hayward
This article is published on: 27th February 2020

27.02.20

In Spain, you can transfer money or other assets to your children or grandchildren during your lifetime, but these transfers can be subject to gift tax. Tax on gifts in Spain is payable at the time they are made.

However, many autonomous regions have special tax allowances or deductions for these gifts. In the Valencian Community, for example, each child or grandchild could be eligible to receive €100,000 without attracting any gift tax, whereas the tax on €100,000, without any allowances, would be at least €12,000. Also, gifting an asset now will mean that any growth on that asset will be free of any future inheritance tax.

The same allowance is available on inheritance, which means each child can receive €200,000 of your wealth, tax free, saving many thousands in inheritance and gift tax.

Gifting your property whilst you still live it in it, with rights to remain, is another option which many people consider. Known as usufructo, children will inherit the bare ownership of the property, possibly paying some gift tax now, but freeing property from the estate when considering inheritance tax.

As with most things relating to Brexit, what will happen next year is not known publicly at the time of writing. Also, it has been suggested that gift and inheritance tax is about to change in Spain. Therefore, if you are thinking of gifting money, or other assets to your children or grandchildren, this might be an opportunity that will not be around for much longer.

Planning for the Inevitable

By David Hattersley
This article is published on: 13th February 2020

The Grim Reaper is not a nice subject, but its finality remains. There are those left behind, alone after the loss of their Spouse or Partner. There is a grieving process. But at the same time is the harsh reality of due process. Wills, Probate, Succession Tax, Inheritance Tax and Death Certificates spring to mind, with added complication in a “Cross Border” society. One hopes that we can offer sympathy, support and help, but trying to soften the blow for loved ones is best prepared for with forward planning such as Wills, Funeral Plans, Life Insurance and Estate Planning.

Circumstances prior to death take many forms. Recent family experience has bought all of this into sharp focus; there was the duality of emotions, allied to the need to help in a professional capacity in what was a complex mire. The double edged sword of living longer applies. Death can be quick, or prolonged due to substantial improvements in many critical fields such as cancer treatment.

“Lingering Death” can take months or years. Drugs can help alleviate Dementia & Alzheimer’s, but do not provide a cure. These illnesses are certified causes on a Death Certificate. What isn’t is the loss of “Independent Existence”. This is a gradual erosion; loss of a lifetime spouse/partner, location, loss of mobility and simply carrying out simple day to day tasks all take their toll. It creates an immense strain on the family, financially and emotionally. ”Long Term Care” often starts in the home, but eventually Long Term Care in a Residential Nursing Home can become the only option.

In Spain costs are substantially less than the UK, but for some the UK becomes the only option due to language and family support. Careful planning in advance can sometimes mitigate the more onerous UK costs and “taxes” or help prolong the benefits of living in Spain. But it is complex and many factors need to be considered well in advance, taking into account “Cross Border Taxes” and differing rules.

It is hard to consider the impact of all the above and many people prefer to ignore it, but I feel compelled to bring this important subject into the open. There are things you can do to make things easier for your loved ones; if financial and legal aspects are well planned out, that is one less thing for them to worry about. I will be posting a series of articles dealing with the many differing issues that I have come across and the steps you can take to overcome them, as it will affect us all one way or another.

Don’t despair or defer; positive steps can be made to mitigate future headaches as much as possible and we are here to help. One of the best ways forward is to sit down with someone who understands the possibilities and to make a plan. Contact me now if you would like to discuss what you can do to make the future easier.

Inheritance Tax in Catalonia

By Chris Burke
This article is published on: 27th January 2020

With all that has been happening this year, it could well have slipped many people by that significant changes have been made to the inheritance laws in Catalonia, particularly for those who are resident there and receiving an inheritance from someone outside of Catalonia.

Previously, spouses and descendants received great allowances in respect of tax due to be paid, starting from 99%. However, for those receiving inheritance as a descendant this has been reduced, at the worst to only a 60% reduction. This raises two main questions, firstly, what would the tax payable be for an inheritance, and secondly, is there a better way to receive this, for example, as a gift rather than an inheritance, which itself has different tax rates?

It is important to understand how an inheritance is taxed in Catalonia. Major factors are the relationship between the deceased and the inheritor, what asset is being received and where the money comes from, i.e. which country. In the UK it is fairly straightforward: if someone dies being resident in the UK and leaves you assets up to £325,000 there is usually no inheritance tax (paid by the estate); anything over this is taxed at 40%. However, in Catalonia it is not that simple (Surprise surprise, I hear you say!) and alongside what is declared and may be tax payable in the UK, you must also declare and pay the relevant tax in Catalonia. Any assets you already own can also be taken into the equation of what tax is payable.

Inheritance tax in Catalonia is paid for by the receiver, not the estate, and very importantly, you have 6 months to declare this inheritance, EVEN if you haven’t received it yet (this is from the date of decease) or you will be fined the following way on the amount of tax you are liable to pay:

5% in the following 3 months (i.e. months 6-9 since death)
10% from 3 months to 6 months
15% from 6 months to 12 months
20% plus interests after 12 months

But if you know that you will need more time you can ask for an extension of an additional 6 months during the first 5 months from the death. In this case, the surcharges described above will not be applicable and you will have an extra period of 6 months.

There are some discounts on inheritance tax in Catalonia. To start with, there is usually no tax to pay on the first €100,000 being received if you are a spouse or child of the deceased. For other descendants the allowance is €50,000. If you are an ascendant the allowance is €30,000 and for any other relation the reduction is €8,000.

From this point on, there are further reductions between 97-99% and there are also other factors to be taken into account, such as are the children under 21, disabled, or if you receive the main home (“vivienda habitual”), family business or shares in certain type of companies.

As you can see, the calculation is not straightforward. The quickest and simplest way, I feel, to give you an idea of what tax you would pay is if I give examples using the most typical scenario of people we help, which is of a parent resident in the UK leaving their child, who is living in Catalonia, an amount of money/assets not including property (as we said there would potentially be extra tax deductions for receiving this). The guidelines are shown below for someone tax resident in Catalonia, over 21 years old, owning assets themselves of less than €500,000. Note that the ‘domestic trousseau’ has also been included (the domestic trousseau is a tax on inherited household items, for example furniture, by default calculated as 3% the estate value):

Amount to be inherited	Tax due in Catalonia
€100,000	€84
€250,000	€6,969
€500,000	€29,888
€750,000	€64,908
€1,000,000	€109,297

One possibility we would check for a client is whether it would it be better to plan the future inheritance and anticipate it, receiving the monies through a donation that is taxed between 5% and 9% between parents and their children (with some specific requirements). Additionally, please note that if a previous donation has been made, this must also be considered in order to calculate the effective inheritance tax rate. We always suggest getting in touch to confirm exactly what the amount would be, and for help declaring it. For the assets themselves, it is worth knowing that many assets overseas are not always efficient to have while living in Catalonia.

For example, investments or ISAs in the UK are declarable and tax is payable in Spain on any gain annually, EVEN if you do not take any of the money, unlike in the UK. It is possible to have these monies in a Spanish compliant structure, still in sterling if you prefer, where you can benefit from the money growing through compounding and potentially greatly mitigating tax. This is where we help our clients to get organised efficiently and can manage the assets if needed.

If you have any questions relating to this article, would like help planning for this eventuality, or anything similar, don’t hesitate to get in touch.

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Spanish Succession and Gift Tax boost for non-EU beneficiaries

By John Hayward
This article is published on: 6th December 2019

06.12.19

Imagine that it is Saturday 1st February 2020. Britain has calmly left the European Union with trade deals in place with Australia, Canada, South Africa, the USA, China, Cuba, Afghanistan, Iraq, Iran, and Columbia (I did say imagine). It is possible that you have children who live in one of these countries and you are resident in Spain. 2 years ago your children would not have benefited from the European Court of Justice ruling (2014) which stated that children who live in an EU/EEA country should benefit from local Spanish rules and allowances when calculating Spanish Succession and Gift Tax. Since the decision in 2018 in favour of a Canadian (Canada is not due to join the EU), the Spanish Supreme Court have ruled that “connected” non-EU beneficiaries will also benefit from the rules of each Autonomous Region in Spain. What this means is that, even if there was a hard Brexit, your child in London would be treated as fairly as one in Valencia, Havana, or Beijing.

It is possible to reclaim overpaid Succession and Gift Tax. Please get in contact if you know anybody who has been a beneficiary of an inheritance using the allowances under the old rules. The claim could amount to many thousands of Euros.

Contact me for more information

Gifting your Spanish property can save tax

Investing some time in estate planning now will help to make certain that your wealth is distributed the way you want it to be and not end up in the taxman´s pocket. One example is where we have helped parents in Spain gift their properties to their children, who live in the UK, whilst the parents continue to live in the property. This could save thousands in future inheritance tax.

Positioning investments in tax efficient structures can also help protect against inheritance tax. We have the solutions.

Inheritance Tax in Catalunya

By Barry Davys
This article is published on: 28th April 2019

28.04.19

Inheritance Tax in Catalunya

So, we have now managed to control the amount of wealth tax due (Wealth Tax in Catalunya). However, when we receive an inheritance or leave something to our family, we are taxed again. Inheritance tax or ‘impuestos de successiones’ feels even worse than Wealth Tax. At this point we have now paid savings tax, income tax AND wealth tax. Now there is IHT on top! Like Wealth Tax, though, it is possible to manage your liability.

Inheritance Tax in Catalunya – How it works
Perhaps the most important aspect is that tax is charged to the recipient of a bequest or property physically located in Spain. For UK nationals living in Catalunya, this is a surprise, as in the UK it is on the estate of the person who has passed away.

Tax is due on the value of the bequest but the rate of tax is dependent on your relationship with the person who has passed away. A spouse, child, sister, uncle or non-related all have different methods of calculating the tax due. Once the tax has been calculated, there may be discounts to be applied to reduce the amount. Indeed, it takes at least four different steps when working out the tax due to end up with the final figure. Fortunately, help is at hand in calculating the amount.

It is also very important to understand that the tax return has to be submitted within 6 months of the death and the tax has to be paid by the same day. A common situation we see is where a person is due to inherit a share of a property but the property has not been sold within 6 months. The forms still have to be submitted to the Hacienda and tax paid based on an estimated value. Failure to do so results in a fine and interest.

How to Manage Your IHT
There are numerous strategies, but for British people, careful planning is required. In the UK it is the estate of the person who has passed away that is taxed, but in Catalunya it is the recipient; so we have two different systems with two sets of rules. Care is needed to ensure that planning in one system does not increase the liability in the other. Fortunately our qualifications and experience in the UK and in Catalunya mean we understand this issue.

Another issue specific to British people living in Catalunya is that they do not plan for RECEIVING a bequest. When asked to assist with planning for inheritance tax it is nearly always from a view of “what can I leave to my children?”. Yet before then people often receive bequests from their parents and family which triggers a tax charge. Planning for receiving a bequest can be as important as planning for leaving a bequest.

Certain assets are exempt from Inheritance Tax. Careful choice of where investments are kept can also help. Finally, dovetailing UK and Catalan Inheritance planning can also make a difference.

If you would like to discuss how to manage your Wealth Tax liability, please email me at barry.davys@spectrum-ifa.com, call me on 00 34 645 257 525, or use the contact form below.

Successful estate planning in France – Having a will is just the beginning

By Spectrum IFA
This article is published on: 16th October 2017

16.10.17

When I left school, I knew more about Shakespeare than I did about personal finance. While we gain academic knowledge through education, and professional knowledge through work, there is no formal channel for learning the key life skill of money management. Most of us pick it up in the same way we acquire our wealth – very few have a strategy, even fewer have a plan.

The problem is that personal finance can be complex, sometimes very complex. Mistakes can be costly. This is especially so in France, even for the French themselves. How much more so then for those of us whose first language is not French. And one of the most complicated areas of personal finance in France is estate and inheritance planning.

Successful personal finance is not just about organising our financial affairs so that, while we work hard for money, our money works hard for us. It is also about putting in place arrangements to transmit that resultant wealth in the best conditions to the chosen ones we leave behind.

The passing of a loved one can be one of the most stressful moments of our lives, one where our families are at their most vulnerable. It is then that we need to rely on the robustness of the arrangements that we have already put in place. In spite of this, most of us do not have even a basic will.

The starting point of any successful estate planning starts with defining the ultimate goal. There are three aspects: –

The capacity to transfer at death whatever assets remain to your preferred beneficiaries in proportions of your choosing
In the most cost efficient and tax intelligent manner with the minimum amount of deductions
While ideally retaining and maximising as much control as possible during your lifetime

The bad news is that in France ‘forced heirship’ succession law and inheritance tax rates of up to 60% can make this difficult to achieve. For families with complicated situations, such as step children, this can be especially problematic and UK arrangements will not necessarily function in France and may have unpredicted results. Moreover, finding a proactive English speaking French lawyer prepared to take the time to fully understand your situation and needs can be both challenging and expensive.

The good news is that there is also a complexity of legal and financial planning strategies that can be used when defining your plan to help you achieve your goals and get you nearer to the ideal goal, as defined above. Here are some examples: –

A will with the possible addition of a ‘clause d’attribution intégrale au survivant’ or ‘clause de préciput’. Given Brexit, hand written wills in English should not be relied on in practice.
A change of marriage regime, typically from ‘séperation de biens’ to ‘communauté universelle’ to protect the surviving spouse
Brussels IV (EU Regulation 650/2012) allows you to avoid French succession law (not tax) by opting for the law of your country of nationality rather than of your residence
Adoption of step children
Gifts (‘donations’)
A strategy of dismemberment (‘démembrement’) of real estate into life interest (‘nu-propriété) and usufruct (‘usufruit’). This can significantly reduce the inheritance tax bill, especially if done sooner rather than later via a will at time of death
Use of assurance vie as tax optimisation wrapper for financial assets, ideal for transmitting inheritance to distant relatives, friends or third parties
Careful editing of the beneficiary clause within an assurance vie policy
A strategy of dismemberment can also be applied to certain assurance vie policies.
Use of inheritance tax free allowances –the standard 100,000 EUR per child per parent and a second one via assurance vie adds another 152,500 EUR per beneficiary.

So make it easier on your lawyer and help him to help you. Given the complexity of both the issues and the solutions, ask for a free holistic review of your situation from your financial adviser so you can already begin to define your needs and goals, and have an idea of what strategies are possible.

Thus prepared, you will make your lawyer’s job easier and so less time consuming. As well as achieving peace of mind, you might even save yourself some fees!

Preparing your loved ones for life after your death

By John Hayward
This article is published on: 9th September 2017

09.09.17

Having recently attended a funeral for a good friend of mine, I was reminded of the problems a death can create, aside from the actual act of dying. It appeared that, although he had organised a funeral plan, he had not made it clear where his Will was. Even if the Will was found, most Wills are written to distribute unspecified assets. An heir needs to know what assets there are before claiming anything. A draw full of files might appear organised but much of the content may be out of date or even completely irrelevant.

Who is the household´s financial controller?
In my experience, when dealing with couples, one party, normally the husband, deals with all things financial. This has resulted in many widows having a hard time with finances on the death of the husband. The thought of picking a phone up to contact their bank is daunting enough. Forgetting one of the six security questions is fatal. Logging into the online banking system is totally out of the question, even if they knew what the user ID and password were.

What can you do?
It is a really good idea to make a list, with company name and reference number, of all the bank accounts, insurance policies, investments (insurance bonds/unit trusts/shares), premium bonds, and anything else which would make life easier for those looking after your affairs on your demise. Here is a link which illustrates just how much information could be required. Are you confident someone will easily be able to put all of this together?

How can we help?
Many years ago, I was a “Man from the major UK insurance company”. I still tend to work on the home service principle. Meeting people in their homes has always been more attractive to me as paperwork will often be to hand. There is also the possibility of a cup of tea and a digestive. There have been times when I have found investments that people were unaware of and also helped to cull the collection of paperwork, creating more storage space, and possibly room for a new sofa (from the proceeds of the policy they didn´t know about). Obviously, I do not wish to major in house clearance but I am happy to help people organise their paperwork, review existing investments and pensions, and make life easier for those with the task of dealing with everything later. Hopefully much later.

Fun financial fact
According to several reports, in 2012, in the USA, a 1 cent coin cost 2.4 cents to make. By 2016, the cost had reduced to 1.5 cents. Making cents still does not seem to be making sense.

Who would inherit your Assets if you die without a will?

By Chris Burke
This article is published on: 26th May 2017

You might be surprised to know that 59%, that’s over half of UK adults, have not written a Will. And if you are over 55 there is a 36% chance you haven’t either. The main reason for this…….most people believe they are not wealthy enough to need a Will, or they are too young to make one. But what would happen to your assets if the worse did happen?

Is there a living husband, wife or civil partner?

If you are married, or have a civil partnership then it’s actually very straightforward and they would inherit your entire estate. But would you want that? And how about if by some awful miracle both of you departed this happy land, what would happen to your assets then? But let us put those to one side for now; imagine you have children, whom decide where they will be raised and who with? If you are living away from the UK this makes it even more complicated. If you don’t have a Will, you are leaving all of this to the authorities and not planning to protect yourself and your loved ones for the sake of a simple document.

Imagine you have a partner, but are not married and not in a civil partnership, would you be surprised to know they have no right to your assets? How would that affect them?
Let’s imagine, as more people these days are for various reasons not having children, that down the family line to Great Aunts/Uncles there is no one related to you. You might not be very happy to know that ‘The Crown? Inherits your assets, that is the Royal Family. In fact fewer people in the UK have Wills than a year ago.

Back in August 2015 the Wills laws changed in Europe, with the main different being you can CHOOSE which laws you wish your Will to follow. The choice is either your country of domicility (usually where you were born/hold a passport for) or the country you reside in now. If you are British most people choose the UK as the laws are easier, you have more control and less complex than those in Spain.

Find out here who would inherit your assets by clicking on this link:
www.gov.uk/inherits-someone-dies-without-will

To enquire about making a Will, don’t hesitate to get in touch and we can arrange for you to talk this through with a Will writer so you know:

The process involved
The costs
How it works
There is no charge for this peace of mind

Sources:
HMRC website
*unbiased.co.uk research conducted by Opinium Research between 19 to 23 August 2016, among 2,000 nationally representative UK adults aged 18+