Putting off financial planning decisions is something many of us are guilty of at some point.
It can feel overwhelming, with too many choices and rules – and too much jargon and paperwork.
Many people think they will deal with it when they have more time or money. Some avoid it out of fear of facing their finances or making a wrong move, and no one wants to dwell on passing wealth to children or future care bills.
Others just do not see the urgency, assuming tax deadlines, retirement and succession planning are years away.
However, in countries such as France and the UK, where tax rules can change quickly, delaying can lock you into higher liabilities. It is a mindset that ultimately costs real money.
Even if you have already adjusted your tax and estate planning, investments and pensions after moving to France, you cannot then forget all about them.
Tax and pension regulations change often, as can your circumstances and objectives, so regular reviews keep your finances on track to meet your goals.
If you are using the services of a wealth manager, they should remind you annually and arrange a meeting to review your financial arrangements.
Tax penalties and savings
When you move to France, you must make yourself known to the local tax authorities and fully declare your income, capital gains and wealth on time each year.
Obtaining a residency card is not enough.
Any delay integrating into the French tax system or missed deadlines for filing returns can lead to significant penalties.
Additionally, without timely planning of your fiscal residency you could miss valuable opportunities for tax savings.
For example, French income tax offers deductions such as home renovation credits and charitable giving offsets. But you must know about them and claim them on time.
If you miss these opportunities, you end up paying the full rate of tax.
French tax residents must declare their worldwide income and gains.
Omitting your UK pension, rental or investment income on time can trigger penalties or double taxation.
Furthermore, if you do not take the time now to understand the options for your pensions and how to optimise them for tax, you will potentially miss out on the chance to do so.
Procrastination here is not just lost savings; it is handing cash to the French fiscal authorities. Act early and you turn rules into opportunities, but delay and they potentially turn into traps.
Sometimes planning opportunities are not apparent unless you take professional advice. For example, we recently advised a client not to draw his French state pension.
That might sound counterintuitive when he was entitled to it, but drawing it would have nullified his S1 Form exemption to social charges, potentially costing him many thousands over the years.
Since in this case the French pension was relatively small, the savings on social charges far outweighed the lost income.
Then there is wealth tax. If your net worldwide property assets exceed €1.3million, planning ahead enables you to use exemptions such as restructuring wealth into assets that do not attract wealth tax.
Deferring your financial planning could result in a sizable and potentially unnecessary wealth tax bill.
Financial planning is not always about building wealth – it is also about protecting what you already have. Delays can turn small oversights into real financial loss, especially when rules change fast.
Assurance-vie
Another opportunity that retirees can miss is tax relief timing.
The assurance-vie, France’s tax-efficient savings policy, allows you to withdraw funds with an annual tax-free allowance after holding it for eight years.
If you open your policy at age 65, by 73 you are enjoying a source of income that benefits from a tax-free exemption. But delay until you are 70, and you are without that tax break at age 75, which could amount to, say, an extra €5,000 of tax on a €50,000 withdrawal.
Inheritance planning
Your children could pay up to 45% French succession tax on any amount over their allowance, while rates for other beneficiaries reach as high as 60% with small allowances. You can make tax-free gifts every 15 years – but you need to act.
The earlier you make gifts, the more chance there is you can make a second one tax-free and ensure your heirs benefit from your wealth, instead of the taxman.
Trusts
If you set up a trust in the UK, be aware that the French authorities may take a rather suspicious view of that structure.
Delays reviewing your wealth and estate planning can cause tax headaches further down the line. Taking the time to properly reorganise your affairs for the French system can save both tax and scrutiny.
Property
Procrastination can also have implications when it comes to property transactions.
If you are selling a second home, with careful planning you may be able to avoid capital gains tax if you act within the tax-free window.
Take control
Rather than a burden, try to see financial planning as a way of taking control of your financial wellbeing.
If you do not enjoy thinking about finances, go back to basics. Make a list of your assets, current and future income, needs in retirement and wishes for your heirs – you will make progress simply by visualising it.
Set aside the time and then reward yourself.
Two heads are often better than one, so perhaps discuss your planning with someone close to you and try to outline your retirement goals.
Professional advice can prove invaluable and make everything so much easier. It can save hours of research, stress and having to navigate French regimes.
All available options will be explained, along with their pros and cons, and you will benefit from their experience and expertise.
It also gives peace of mind that you have not overlooked anything important and your finances are correctly set up to meet your objectives.
Rob Kay is a financial adviser and regional director of Blevins Franks
