The main benefit of regular financial planning reviews is, of course, to keep your financial affairs compliant and up to date. This is even more important for UK nationals living in Portugal today as we navigate a post-Brexit world. In any case, tax rules or financial regulations can change at any time, which may affect the tax efficiency – or even legality – of your existing arrangements. There may also be new opportunities that you could find beneficial.
Reviews are also a good prompt to consider if any changes in your personal circumstances
warrant a rethink of your financial and estate planning arrangements. Have you welcomed any new family members, for instance, or are there any upcoming major life events – such as retirement, relocation or divorce – that mean you should adjust your planning? Have your needs or goals changed for any reason?
Looking at the bigger picture
Many people only consider segments of their finances at a time. They may have bought shares in companies they like, for example, or invested in funds recommended by an adviser years ago. They may speak to a tax accountant about Portuguese taxation and tax planning opportunities. Then they speak to a lawyer about setting up a Portuguese will. At some point they look at their pension funds and try and work out how best to access their retirement savings.
For a truly effective review, and to ensure it is suitable for your life in Portugal, consider how your tax planning, investments, pensions and estate planning work together.
Residency and taxation
You should first make sure you know where you are resident for tax purposes, especially if you are new to Portugal or spend time in more than one country. You then want to structure your investments and wealth in the most suitable way to minimise taxation – in Portugal, the UK and wherever you have financial interests – in way that still meets all your obligations.
Regardless of how effective your tax planning in the UK was, you pretty much need to start afresh in Portugal; what was tax-efficient there is unlikely to be tax-efficient here. Make sure you explore the opportunities available in Portugal to establish what would work for your situation and aims, and how much tax you could potentially save.
It is vital to review your estate planning when living in Portugal, as both succession law and tax work very differently to the UK.
Are you aware, for example, that Portugal’s ‘forced heirship’ rules could automatically pass a significant proportion of your worldwide estate to your direct family, whatever your intentions? This can have unwelcome consequences for certain families unless you plan ahead. You can specify in your will for the EU regulation ‘Brussels IV’ to apply relevant British law to your estate instead, but take care to understand your options and any tax implications.
Savings, investments and pensions
Ultimately, your financial planning must be specifically structured around your personal circumstances – your lifestyle today and plans for the future, family situation, income requirements, objectives, time horizon and risk tolerance.
If you haven’t reviewed your savings and investments recently, you need to check they are suitable for you today and the current economic climate. Do they have the right balance of risk and return? Do you have adequate diversification? Can they provide the income you need without risking the capital?
At the same time, consider your tax liabilities on investment income and gains, and whether you could take advantage of tax-efficient arrangements as a resident of Portugal. Also, how will these savings be passed to your heirs and what inheritance taxes will they have to pay? Can the funds be passed on directly or will there be a lengthy probate process?
And when deciding what to do with your pensions, take care to explore all your options to establish what’s right for you and protect your retirement benefits through regulated advice.
Pulling everything together
Every family is different, so make sure your financial planning is carefully designed for yours. All the various aspects should work cohesively together to create an overall wealth management plan that provides long-term financial security for yourself today and achieves your wishes for your heirs in the future.
For peace of mind that you have covered everything, and that making one financial decision will not have unexpected consequences on another, take specialist, cross-border advice. Be mindful, however, that some UK-based financial advisers are no longer legally authorised to support Portuguese residents post-Brexit, so check if this will affect you.
Blevins Franks’ local advisers are fully authorised to provide financial advice in Portugal and support clients across the country. With years of experience and in-depth knowledge of both Portuguese and UK tax regimes – and the interplay between them – they are best placed to help ensure you and your family are in the best financial position possible.