John McCord discusses the importance of defining financial goals and responsibilities in his piece discussing Investment Policy Statements (IPS). While not a financial plan, an IPS is a critical component of a holistic financial plan that takes into consideration insurance, estate, and retirement planning. Critical in any client-financial advisor relationship is a mutual understanding that reflects the client’s financial planning situation. An IPS assists in this mission and details and defines a client’s needs, goals, investment knowledge, net worth, time horizon, and risk tolerance. With an IPS document, clients have a more clear understanding of a financial advisor’s investment philosophy and reference point to adjust when a change in personal financial situation occurs. Cardinal Point wealth Management works with clients to ensure a customized cross-border financial planning strategy and to develop Investment Policy Statements that reflect the unique situation of each client.
Articles
Why Is It Important For Canadian Expats To Disclose Foreign Based Accounts to the IRS?
John McCord’s article focuses on the IRS (US Internal Revenue Service) policy that taxes the worldwide income of US residents. Many US residents are unaware of this policy and the law that requires the disclosure of the majority of foreign accounts, as they are subject to US taxation. Disclosure rules also apply to Registered Retirement Savings Plans, pensions and bank accounts. In order to enforce these policies the IRS is aggressively pursuing civil and criminal penalties for noncompliance and maintains close communication with the CRA (Canadian Revenue Agency), references the FBAR (Report of Foreign Bank and Financial Accounts) and, beginning in 2013, will enforce the FATCA (Foreign Account Tax Compliance Act) in order to do so. FATCA will focus on the compliance of foreign-based accounts and increase communication with foreign financial institutions in order to identify US residents who do not report their foreign-based accounts. For both Canadian Expats and US residents with foreign accounts, McCord stresses it is critical to consult with a cross-border financial advisor in order to ensure compliance and identify the right solution that may include tax, legal and investment professionals depending on your personal situation.
How Does Canada’s Public Pension Program Compensate Expats Living in the US?
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.
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.
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