Written by: Peter Dougherty | BISSAN Wealth Management
Most Americans who have retired in Spain receive competent financial guidance. Their Spanish tax preparer complies with domestic tax rules. Their CPA in the U.S. does the IRS reporting correctly. And although their local bank says mañana a lot, which sometimes refers to “tomorrow” and at other times to “don’t even think about getting it soon” — their transactions eventually get completed.
And yet, something is often still missing.
Even when their professionals are technically competent, the outcome for these retirees can still be wrong. Individually, the system in Spain and the system in the U.S. make sense. It’s when they’re combined — namely, by American retirees in Spain — that complications arise. The result is often like two drivers trying to steer the same car.
In the United States, retirement planning is already complex. There are contribution limits, phase-outs, qualified and non-qualified plans, and required minimum distributions. It’s technical, but structured.
Retiring in Spain adds an entirely new layer.
Inheritance rules are different in Spain. Probate courts don’t exist. The use of trusts for estate planning is far less common than in the U.S. And Spain imposes something Americans often find surprising: a “wealth tax” (Impuesto sobre el Patrimonio), which is based on the net worth of individuals rather than on their income. Unlike income tax, which is based on what a person earns each year, this tax applies to the total value of assets owned by a taxpayer. Critics say it’s proof that even your bank account in Spain might need to pay rent.
Many retirees assume that financial advice works like luggage—you pack it in the United States and simply carry it with you to Spain. But financial strategies behave less like suitcases and more like medical transplants.
In medicine, a transplant involves moving something healthy from one body into another. The organ itself may function perfectly. But once it enters a new environment, complications can arise. New adjustments are required.
Financial strategies can behave the same way when they cross borders.
A retirement plan designed for the U.S. financial and tax system may work beautifully inside that environment. But when it’s “transplanted” into Spain, the surrounding rules change. What once worked smoothly may suddenly require adaptation.
Just as successful medical transplants require specialists who understand both the organ and the body receiving it, cross-border financial planning works best when someone qualified is paying attention to how the two systems interact.
In my work helping Americans plan their finances while living in Spain, I see this situation frequently. That’s why I became a dual-certified financial planner: a CFP® professional in the U.S. and a European Financial Advisor (EFP) certified by the European Financial Planning Association of Spain (EFPA España).
The real challenge for American retirees in Spain isn’t either system on its own. It’s what happens when the transplant takes place. With the help of dual-certified financial planning advice, American retirees in Spain can eventually adapt to everything—except maybe that dinner happens when they used to go to bed.
For more information: https://www.financial-planning-in-spain.com
Related: Passing Down a Family Business Without Conflict, Chaos, or Costly Errors