Strategic financial planning for the New Year
Of course, you can review your financial planning any time to ensure it is on the right path, but the New Year is the perfect prompt to do so if you have not taken a fresh look for a while.
One key reason to review your wealth management is to ensure it is up to date. Consider whether any tax or financial rules have changed and/or if there have been developments in your personal circumstances.
But an effective review of your financial planning, to ensure it is suitable for your life today and wishes for the future, needs to go beyond that.
Many people only consider segments of their finances at a time. They may have bought shares in companies years ago. They may speak to a tax accountant about Spanish taxation, then a lawyer about Spanish wills. At some point they look at their pension funds.
For truly effective financial planning, however, you need to consider all these various aspects together. For example, how you hold your investments can make a difference to your tax liabilities.
Here are three key areas you should consider in your financial planning review.
Spanish residency and taxation
The fact that you are resident in the Canary Isles, rather than the UK, has a significant impact on your financial and tax planning.
Make sure you know where you are resident for tax purposes. The Spanish and UK residency rules are different and complex. The double tax treaty determines where you pay tax if necessary.
Regardless of how effective your tax planning in the UK was, you pretty much need to start afresh in Spain. What was tax efficient in the UK is unlikely to be tax efficient here. Explore the compliant arrangements available in Spain to establish what would work for you.
The way you own assets could make a difference to how you can distribute them on death and how much tax your beneficiaries pay, so take this into consideration early on.
The Spanish succession tax rules are very different to UK inheritance tax rules and you need to plan around both. Spain’s succession law establishes forced heirship which can have unwelcome consequences for some families. UK nationals can use the EU regulation ‘Brussels IV’ to distribute their estate under UK law, but first confirm it is the best solution for you.
Financial structuring for life in Spain
Your financial planning must be structured around your personal circumstances – your lifestyle, plans for the future, family situation, income requirements, objectives, time horizon and risk tolerance.
You may need to take a fresh look at all your 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 are easier to manage?
At the same time, consider your tax liabilities on investment income and gains and whether you could use tax-efficient arrangements to hold your investments in Spain.
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 have covered everything, take professional advice. Your adviser should take the time to get to know you before outlining their personalised recommendations for you.
The 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; an individual is advised to seek personalised advice.