The Importance of Becoming “Financially Well Organised”


Becoming Financially Well Organised

The Importance of Becoming “Financially Well Organised”

Being Legal, Smart, & Prepared

Death and taxes are guaranteed. The importance of being “Financially Well Organised” cannot be overstated. It will save you and your beneficiaries very significant amounts of money and time and provide comfort for all at important times in your lives.

When advising clients about their “Financial Organisation”, we usually recommend only retaining money in their country of tax residency that is going to be Notarised, i.e. when buying a home, a business, a car or boat etc… or money that is going to be spent on funding and protecting their desired lifestyle.

Sufficient cash should be held to cover short-term emergencies but the majority of other longer-term liquid assets and cash should be retained elsewhere in a Compliant Tax Structure appropriate to the current or future planned tax residency.

Asset Rich – Cash Poor – Property Owner

Most people, especially the British, like to own the property that they live in. However there is a time in life as we grow older, when owning a property can be a burden on the surviving partner especially for example, in Spain where Inheritance Tax is charged against the survivor or recipient of an asset.

Owning property jointly in Spain can leave a loved one with a tax bill that seriously erodes the surviving partners standard of living, at a time when they are most vulnerable having become bereaved.

Property is a good long-term investment but is illiquid, costly to buy and sell and needs maintaining. Furthermore it is notarised; therefore is an easy target for Tax Collectors to raise additional revenue, especially when austerity measures are enforced!

Case example (Spain)

A married couple who are Spanish Tax Residents with some pension income and own without mortgage a 450,000 EUR property. They are in their 60’s with a grown-up family and grandchildren.

There are things that they always planned to do in retirement but find they currently cannot afford. In our Financial Planning Review we made them aware of the tax implications in Spain when one of them dies.

They had confirmed that their main priority was to be able to at least maintain their lifestyle and improve it if at all possible. It was also important to them to protect their estate from avoidable taxation in order to pass on as much as possible of their assets generated over their lifetime to their chosen beneficiaries.

It was explained how these objectives could be delivered and after careful consideration they decided to sell their property and moved into a beautiful rented apartment in a central location where they now rarely have a need to use their car.

The profit after tax from the sale of their property was re-invested into a Spanish Compliant Tax Structure held outside of Spain. They keep their bank account balance under 50k EUR each year to avoid compulsory reporting to the Spanish tax authorities.

Only the income taken from the Tax Structure needs reporting annually, the capital does not, as it is held in the Tax Structure and there is no limit to how much can be invested. The additional income is drawn down as an annuity and is subject to special tax treatment of annuities in Spain.

The rent they pay for the apartment is paid from the proceeds of the sale of their home which amounts to only a 1.8% of the capital and affords them to take some additional income from their new investment to do the things they always planned leading up to retirement.

They are extremely happy in their new environment and now have significant additional income. Furthermore they have no property maintenance issues and have even spent some money on the rental property to make it more personal to their needs.

They have a diverse Balanced Risk Portfolio with Stop Loss Protection and are currently not depleting their capital as growth is exceeding the income taken from their investments; therefore their whole estate is protected and will eventually pass to their selected beneficiaries.

They tell me that the most satisfying part of being “Financially Well Organised” and making their assets work harder for them is their improved lifestyle and knowing they can maintain their lifestyle without having to pay Spanish Inheritance Tax after the loss of one of them.

Another threat to retirement lifestyle is we very often find that the couples income in retirement is heavily reliant on the main earners pension which is usually the male partner and on his death a significant part of this income is lost. Statistics show that women live longer that men and are usually younger than their husbands. Whatever the statistics state, this can be very debilitating at a very sensitive time for the surviving Partner and property ownership and Inheritance Tax adds to the stress

At Stein we do not want our clients to be saddled with the additional burden of legally avoidable taxation and having to make life changing financial decisions at a time of vulnerability with the sadness of losing a partner.

All valid and worthwhile Financial Planning, no matter at what time of life you currently are, starts with becoming “Financially Well Organised”.

Time lost to Financial Planning can never be replaced and the sooner this is achieved the more that can be achieved with your assets and more of your estate will be passed to named beneficiaries.

They are happy in their new environment and now have significant additional income which affords them a better lifestyle and to do the things they always wanted to do but never thought they would be able to afford. They have even spent some money on the rental property to make it more personal to their needs.

If you would like to find out how becoming “Financially Well Organised”, Stein PCP style, will help you make the best use of your assets and protect your estate please let me know by emailing or call me on my private mobile, number +34 653122716.

With best wishes

Stuart Langan

Stein Personal & Corporate Planners


The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.

About the Author

Stuart Langan

Stuart started his Financial Services career in 1982 and in 1992 was a founding partner of J Rothschild Partnership, later to be St. James’s Place, listed on the FTSE 250 Index. Stuart moved to Spain in 2000, leading him to leave St James’s Place in 2002 and is the Principle of Stein Personal & Corporate Planners.

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