Focus on Wealth Planning #7: Financing your lifestyle
Financing your lifestyle
Planning for changes in your income
Many changes can occur over the course of your personal and professional life.
You might have significant income gaps and variability, particularly when:
selling a business,
selling a rental property,
going into retirement,
or experiencing any change in your career.
To maintain your lifestyle, it is essential to assess your needs in order to compensate at minimal cost any drop in income.
There are different kinds of revenue streams:
salaries or pensions,
dividends,
real estate income from furnished or unfurnished properties,
financial investment income.
Your expenses also come from different sources:
tax charges,
credit charges,
specific family expenses.
Maintaining your lifestyle
To maintain or improve your lifestyle, you may wish to consider a number of options, which will have taxes, wealth planning and financial implications:
For example, you could trade off real estate income into financial income via a real estate Family Buy-Out (FBO) by selling a property to a family-owned company, in which the children are majority shareholders, which can obtain a loan. This will allow you to pass on part of your real estate assets and earn cash, while keeping the asset in the family in the long term. A lease-back for business premises is another option. In this case, an operating company sells its premises to a real estate leasing company, earning cash from the proceeds and retaining use of the property on a rental basis.
The proceeds can then be reinvested in financial assets to generate replacement income.
Managing your income amount in optimal conditions
Managing your future income means organising and managing your estate ahead of time.
Let’s say you own a holding company that is cash-rich after selling its main shareholding.
When a personal holding company sells its main shareholding, the impact of the sale on the owner’s personal situation, their estate, and the means of financing their future lifestyle must be assessed.
You will need to decide, with your advisors, how best to use your holding company to meet new needs and how to allocate the exceptional profit from the sale of the investment.
First option: you could opt for a dividend payout, taxed to a default flat tax and, where applicable, an exceptional surtax on high income for a total rate of 34%. The cash could then be invested in a life insurance policy to generate additional income. Upon your death, the transfer of the death benefit to beneficiaries would be taxed at a maximum rate of 31.25%.
Second option: you could anticipate the transfer of your estate to your children by giving them bare or full ownership of the holding company's shares. For someone aged 51 to 60 who gifts 30% in full ownership and 70% in bare ownership, the transfer cost would be a 31% marginal tax rate. If the shares are sold at a later stage, the proceeds could be reinvested in a split-ownership structure in assets that can generate additional income: real estate, endowment policies or personal assets management companies, etc.
Simply put, anticipating the transfer of your estate through bare ownership allows you to plan your succession at a lower cost while securing your future income.
How we support you
Our wealth planners at Societe Generale Private Banking can work with you and your advisors to conduct a full assessment of your estate, identify your income priorities, and help you choose the legal and tax structures best suited to your situation.
Would you like to discuss this subject further with us?
GENERAL DISCLAIMER:
Societe Generale Private Banking is Societe Generale Group’s business operating through its head office at Societe Generale SA, as well as departments, branches and subsidiaries located in the areas referred to below, under the Societe Generale Private Banking brand, and is the distributor of this document.
The information shared on this page is for information purposes only and may be amended without prior notice. Its content is not intended to provide an investment service. In addition, it does not constitute investment advice or a personalised recommendation on a financial product, or advice or a personalised recommendation on insurance, or any form of canvassing, or legal, tax or accounting advice from any Societe Generale Private Banking entity whatsoever.
The offers related to the businesses and to the wealth management and financial information referred to on this page depend on each client’s personal situation, the legislation that applies to them, and their tax residence.
Therefore, these offers may not be suitable or authorised in all Societe Generale Private Banking entities. Furthermore, access to some of these offers is subject to specific eligibility conditions. Certain offers mentioned may incur various risks, involve potential loss of the entire amount invested, or even unlimited potential loss, and consequently may be restricted to a certain category of investor, and/or be suitable only for experienced investors who are eligible for these types of products, services and offers.
Contact private banker to find out whether these offers are suited to your needs and adapted to your investor profile.
DISCLAIMERS BY JURISDICTION
France: Unless indicated otherwise, this document is published and distributed by Societe Generale, a French bank authorised and supervised by the Autorité de Contrôle Prudentiel et de Résolution (French Prudential Supervisory and Resolution Authority), located at 4 place de Budapest, CS 92459, 75436 Paris Cedex 09, under the prudential supervision of the European Central Bank (ECB) and registered with ORIAS as an insurance broker under number 07 022 493, orias.fr. Societe Generale is a public limited company (société anonyme) under French law, with capital stock of €1, 003, 724, 927.50 as of 17 November 2023 with its registered office at 29 boulevard Haussmann, 75009 Paris, France, and registered with the Paris Trade and Companies Register (Paris R.C.S) under the unique identification number 552 120 222. Paris. More details are available on request or online at www.privatebanking.societegenerale.com/.
Luxembourg: This document is distributed in Luxembourg by Societe Generale Bank Luxembourg, a limited public company (société anonyme) under Luxembourg law, registered at Luxembourg’s companies house under the number B 6061 and registered credit institution regulated by the Financial Sector’s Surveillance Commission (CSSF) under the control of the European Central Bank (ECB), and whose registered office is located at 11 avenue Emile Reuter – L 2420 Luxembourg. More details are available on request or online at www.privatebanking.societegenerale.lu/. No investment decision should be made solely on the basis of this document. Societe Generale Luxembourg accepts no responsibility for the accuracy or otherwise of information contained in this document. Societe Generale Luxembourg accepts no liability or otherwise in respect of actions taken by recipients on the basis of this document only, and Societe Generale Luxembourg does not hold itself out as providing any advice, particularly in relation to investment services. The opinions, views and forecasts expressed in this document (including any attachments thereto) reflect the personal views of the author(s) and do not reflect the views of any other person or Societe Generale Luxembourg unless otherwise mentioned. This document was prepared by Societe Generale. The CSSF has neither verified nor analysed the information contained in this document.
Monaco: This document is distributed in Monaco by Societe Generale Private Banking (Monaco), a joint stock company (SAM) under Monaco law registered at 11 avenue de Grande Bretagne, 98000 Monaco, Principality of Monaco, governed by the French Prudential Supervisory and Resolution Authority (ACPR) and the Financial Activities Supervisory Commission (CCAF) of Monaco. Financial products sold in Monaco may be restricted to qualified investors under Act no. 1339 of 07/09/2007 and Sovereign Order no. 1285 of 10/09/2007. More details are available on request or online at www.privatebanking.societegenerale.com/.
Switzerland: This document may constitute advertising within the meaning of the Swiss Federal Act on Financial Services (LSFin). It is distributed in Switzerland by Societe Generale Private Banking (Switzerland) SA (SGPBS or the Bank), whose registered office is located at rue du Rhône 8, CH-1204 Geneva. SGPBS is a bank authorised by the Swiss Financial Market Supervisory Authority (FINMA). This document may under no circumstances be considered as investment advice or recommendations from SGPBS. The Bank recommends obtaining the advice of a professional before acting or not acting on the basis of this document, and accepts no responsibility in relation to the content of this document. Financial instruments, including shares in collective investment funds and financial products, may only be offered in compliance with LSFin. More information is available from SGPBS on request or online at www.privatebanking.societegenerale.com.
This document is distributed neither by SG Kleinwort Hambros Bank Limited in the United Kingdom, nor by its branches in Jersey, Guernsey and Gibraltar which operate collectively under the “SG Kleinwort Hambros” brand. Accordingly, the information provided and any offers, wealth management and financial businesses and information do not concern these entities and may not be authorised by these entities nor adapted to these regions. More information on the activities of Societe Generale Private Banking entities located in the United Kingdom, the Channel Islands and Gibraltar, including supplementary legal and regulatory information, is available at www.kleinworthambros.com.
Focus on Wealth Planning #5: Structuring and managing your wealth
Interview with Omid Zafaranlou, Head of Digital & Active Investment Advisory at Societe Generale Private Banking France.
Following its simplification under the Modernisation of the Economy Act in 2008, the management trust can now be used to...
Analysis with Edouard Camblain, Investment Advisor and Behavioral Finance Expert at Societe Generale Private Banking.