In this article, John McCord discusses Canada’s two-part public pension program and how pension benefits are applied to Canadian expats living in the US. Eligibility for the first part, Old Age Security (OAS), is determined by age, time spent as a Canadian resident and legal status, but not retirement status or employment history. The second part, the Canadian Pension Plan (CPP), is directly tied in to salaries. The specific CPP benefit is determined by the amount and duration of CPP contributions (from prior employment). The highlight of both benefit programs is that, due to the Canada-US Tax Treaty, expats are not subject to Canada Revenue Agency tax rates or foreign withholding taxes. With lower US tax rates, this provides a clear benefit for Canadian expats living in the US. As each program mentioned has strict qualifying criteria, McCord details some of the specific regulations and emphasizes that it is important to partner with a qualified team of tax, legal and investment professionals who have specific experience in cross-border financial planning strategy.
Articles
What Should Canadians Consider Before Purchasing US Real Estate?
This article outlines financial planning concerns for Canadian buyers who want to take advantage of real estate opportunities in the United States for either financial or lifestyle choices. Author John McCord highlights complex issues such as estate, insurance, financing, residency, immigration and taxation that are important considerations in the purchase of property in the U.S. In addition to potential tax advantages, a unique real estate investment opportunity through the EB-5 visa program also offers the possibility of a streamlined Green Card approval process. To understand the merits and the pitfalls, McCord recommends consulting with a qualified team of professionals who specialize in Canadian and United States cross-border transitioning and asset management in order to develop the best individualized strategy.
Why Is It Important To Create A Cash Flow and Net Worth Statement?
This article focuses on the cash flow and net worth statement as essential to the financial planning process, serving to both quantify and qualify one’s financial affairs. When updated annually, these documents can help set goals and be useful in tax planning and risk management. The cash flow statement shows inflows and outflows of cash receipts and disbursements over a time period. Subtracting total cash outflows from total cash receipts produces a number that shows the individual or household’s spending patterns. Cash flow statements also help project future income and spending patterns. The net worth statement is comprised of three components: assets, liabilities, and net worth. Net worth is determined by subtracting total liabilities from total assets; it helps indicate one’s level of financial freedom and flexibility.
Is Your Financial Life In Order?
John McCord’s article highlights the start of 2012 as the perfect time to reassess the state of your financial plan, including your investment, taxation, insurance, retirement and estate needs. When cross-border complexities are present, the need for a coordinated review is even more pronounced. The process starts with a qualified advisor and a planning analysis of the preceding year’s after-tax cash flows. An advisor should also review goals, values and time frames, and financial plans should be updated to reflect significant events. In addition, account consolidation should be considered in areas such as retirement accounts.
Cross-Border Planning Full of Conflict
This article from Advisor.ca discusses the complexities of financial planning for Americans and Canadians whose lives, assets and interests cross two borders. Cardinal Point’s James Sheldon points out that those in a dual-citizenship marriage or with cross-border assets need financial advice, investment planning, and wealth and estate planning that meet securities regulations in both the U.S. and Canada. Multiple tax jurisdictions need a more sophisticated level of advice, and one of the primary challenges of cross-border financial planning is navigating the big three: the U.S. Internal Revenue Service (IRS), the Canada Revenue Agency (CRA) and the Canada/U.S. Tax Treaty. Given the lack of continuity in how the three deal with assets, there is the potential for double taxation. The article also looks at what to consider in preparing for the Canadian departure tax and what to do with a will or tax-free savings account before making a move.
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