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Canadian Snowbirds

Moving to Canada? Essential Tips & Information

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Irrespective of where you stand politically, the circus currently playing out in the contest for the next President of the United States has a number of Americans—both Democrats and Republicans—looking at options that might include leaving the United States and moving to Canada.

Indeed, by midnight of March 1—Super Tuesday in the United States—searches for “How to move to Canada” had spiked by 1,500%, according to Google Trends.

For some, leaving the country might seem rather extreme. However, we get it!

At Cardinal Point, many of us have a stake in the direction of our political system in both Canada and the United States. And we are intimately aware of the unique immigration, financial, tax, investment and estate-planning implications of becoming an American in Canada. We understand the immigration options and the challenges those decamping for the north might face.

Before Americans hop into their cars, fill their gas tanks (in gallons) and make their way to Canada, they first need to be aware that one can’t simply show up at the Canadian border and expect to live and work in Canada. Like the United States, Canada has a formal immigration process that must be adhered to.

In order to live and work in Canada, you might be able to secure your immigration via one of a number of business and family categories.

Canada’s family immigration laws differ from those of the United States. Notably, you cannot just marry a Canadian citizen and expect to automatically become a Canadian citizen. A formal process must be adhered to before a spouse of a Canadian citizen can live permanently in Canada and ultimately seek Canadian citizenship.

https://ircc.canada.ca/english/helpcentre/answer.asp?qnum=357&top=5

If you are already employed in the United States, your occupation might qualify you for one of Canada’s Skilled Worker Entry programs. This would entitle you to a visa to live and work in Canada. And depending on your work or trade, you might be entitled to the new Express Entry application process.

https://www.canada.ca/en/immigration-refugees-citizenship/services/immigrate-canada/express-entry.html

If you are self-employed in the United States, you might be able to qualify for business immigration to Canada under the Self–Employed Person program. If you have a specific occupation that fits into the Government of Canada’s Arts and Culture or Technical and Skilled Occupations in Art, Culture, Recreation and Sport, you might be able to immigrate to Canada under that program.

https://www.canada.ca/en/immigration-refugees-citizenship/services/immigrate-canada/start-visa/eligibility.html

Under the Provincial Nominee Program (PNP), Canadian provinces and territories are allowed to nominate persons who wish to immigrate to Canada and who are interested in settling in a particular province. Each Canadian province – except Quebec – have agreements with Citizenship and Immigration Canada (CIC) that have developed programs to welcome certain nominees to settle and work in the province and contribute to the community.

https://www.canada.ca/en/immigration-refugees-citizenship/services/immigrate-canada/provincial-nominees.html

If you would like to start a business in Canada, you might be entitled to apply for the Start-up VISA. You would have to have a Letter of Support from a designated angel investor group, venture capital fund or business incubator. You must also meet specific ownership requirements in the business. Get scores of at least 5 in the Canadian Language Benchmark test in either English or French and finally meet sufficient settlement funds based on the size of your family.   You also must be able to secure a minimum investment of $200,000 from a designated Canadian venture capital fund or $75,000 from a designated Canadian angel investor group. No investment is required if you are accepted into a Canadian business incubator program.

http://www.cic.gc.ca/english/immigrate/business/start-up/eligibility.asp

The immigration process is definitely the first hurdle that you would have to overcome before entering Canada. It is a process and for some could be a rather costly one as well.

Working with appropriate Canadian immigration counsel, the advisors at Cardinal Point are well-positioned to assist you in partnering with the right attorney through this process.

But beyond the immigration hurdle, if you remain a U.S. citizen, you would still be considered a resident of the United States for income, gift and estate-tax purposes. So if you were hoping to avoid the tax policies of the previous and next administration, I’m afraid you’re out of luck.

As a U.S. citizen, you would be required to continue to file U.S. income-tax returns on your worldwide income (even if that income is only now in and from Canada). And you would have to comply with a number of other foreign reporting and compliance requirements.

Furthermore, as a resident of Canada, you would also be subject to tax in Canada on your worldwide income, including any income that might continue to trickle in from the United States.

Although both countries would have the right to tax you on your worldwide income, you would be entitled to apply foreign tax credits against the same source of income to help to reduce the perceived exposure to double taxation. However, without proper tax planning upon entering Canada, and without continued ongoing planning, you could find yourself exposed to double taxation and a number of nasty tax surprises.

Fortunately, we have the unique expertise to assist you so that you can enjoy the Canada-U.S. lifestyle.

To that end, we would encourage you to request our Cardinal Point White Paper: Manage your Canadian and U.S. cross-border lifestyle.

This paper will provide you with additional insight into how a Cardinal Point cross-border financial advisor can assist you with your unique cross-border financial planning complexities.

And if it does not make sense to move to Canada, bear in mind that our offices in the United States can provide you with comprehensive, U.S.-only wealth management services.

Possible Tax Changes for Snowbirds

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1040thumbWriting about possible U.S. tax changes for Canadians, Terry Ritchie, Director of Cross-Border Wealth Services, appeared in the January 2015 issue of Advisors Edge. In the “TaxBreak” column, Terry summarized how some of the recently enacted changes at the IRS can affect snowbirds.

Though the new U.S. Congress will likely focus its efforts on corporate taxation, there are still a number of newly enacted tax provisions to keep track of. More than 40 changes were enacted by the U.S. Internal Revenue Service in late 2014. A few of the notable changes include: an increase in the standard deduction for singles and married persons; limitations on itemized deductions; and an increase of the basic exclusion amount for the estates of people who die in 2015. Read the full article here.

Travel Insurance Between Canada and the U.S.

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Do You Need It?
For our Canadian and U.S. clients, cross-border travel includes an array of possibilities, from a weekly commitment to the rare excursion. The question is: do you need travel insurance? In this article, we look at considerations that keep your best interests in mind.

Many of Cardinal Point’s clients enjoy the best of two worlds. Whether travel is for business, pleasure, or annual snowbird getaway, our clients frequently make the trip across the U.S.-Canada border and have the process down pat: pack your bags, book your flights and keep track of the days spent in each country. But how much consideration have you given to travel insurance? It’s not just for cancelled flights anymore. Travel insurance covers a range of situations from a last-minute change of plans to, in the worst-case scenario, a medical emergency away from home. Here’s the good news: you may already have coverage through your insurer or even your credit card company.

Let’s begin with the trip itself. If you are traveling by airline, it’s tempting to rush through the online booking process in order to secure the best price—and your seat of choice. Take the time to review cancellation policies. If the small print is burdensome, call the airline directly. The moment you are ready to hit the “purchase ticket” button is the time that airline representative are trained to provide you with all the information you need to make that decision. Depending on how and from whom you purchase your tickets, cancellation policies may vary, even for the same flight. If there is a chance you will need to change plans at the last minute, be sure that you will not be forced to purchase tickets for an entirely new itinerary.

Are you planning to drive across the border? Check with your auto insurance provider about international coverage. For your peace of mind and safety, it’s good to know the extent of your liability in case of an accident. Further, some automotive policies that cover theft in your home country do not extend to international travel. The good news is: your homeowner policy may cover items that are in your vehicle when you travel. Getting the details can be as simple as a telephone call.

While you are across the border—either north our south—medical insurance coverage is critically important. As the saying goes, “An ounce of prevention….” In the case of health insurance, whether in Canada or the United States, plan ahead to prevent excessive costs for anything from a sprained ankle to a medical emergency. First, check with your insurance policy to determine coverage. If your plan does not cover international travel, consider purchasing insurance for the duration of your trip. The peace of mind this affords is well worth the investment of time and money.

Finally, look for opportunities to save by finding out what coverage you already have. Many credit card providers offer insurance for parts of your trip booked and paid for by their card. Again, a telephone call or online request can clarify what is covered for you and your family.

Whether you travel on a schedule or “on the fly,” researching your insurance options ahead of time will allow you the opportunity to enjoy your journey.

What Every Canadian Snowbird Should Consider Before Buying a “Nest” in the U.S.

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When it comes to real estate, it’s been said that the three most important words are: location, location, location. For southern-bound Snowbirds, owning a home in the U.S. offers the opportunity to return to a favorite place each year, a home away from home. This allows you the certainty of knowing where you will spend your vacations and how many of your friends and family can join you there. And as the seasons pass, your vacation home will likely appreciate in value—an incentive to purchase, rather than rent, your winter getaway. If you are considering buying a “nest” in the U.S., you’ll want to take into account two key factors: choosing the right ownership structure and allocating your time across the border.

The time to decide how to structure ownership is before making your purchase. Establishing a Canadian corporation as the legal owner will help avoid U.S. estate taxes; however, rental revenue and capital gains will be taxed at the U.S. corporate tax rate of up to 35%. A Canadian partnership significantly reduces the tax burden of U.S. property that earns rental income, but will be subject to estate taxes. Still other options are setting up a Canadian trust or a hybrid trust. Each type of ownership comes with a different level of tax exposure. For this reason, it’s important to (a) understand the tax implications for you and your family, considering your “world wide” assets, and (b) establish the corporation, partnership or trust before you buy a home in the U.S. With careful planning, you can relax and enjoy your vacation home with peace of mind.

Once the purchase is complete, you will likely want to spend as much time as possible enjoying your vacation getaway. While most of us think of 183 as the magic number—days spent in the U.S. per calendar year—in fact it’s wise to keep the number 3 in mind. The IRS’ “substantial presence” test considers the time you spent in the U.S. over a three-year period, according to this formula:

  • 100 percent of days in the current year; plus
  • 1/3 of days in the prior year; plus
  • 1/6 of days in the second preceding year.

If the average number of days spent per year, over the three-year period, exceeds 183, this may trigger a U.S. tax residency, subject to U.S. taxes. If “substantial presence” is established, you may still have the option to file for a “Closer Connection” exemption with the IRS. Keeping track of your travel dates every year is the best protection.

Of course, our closest connections are with friends and family. With careful planning, a snowbird getaway will be a great place to spend time with your loved ones, year after year.

John McCord is the Director of Private Wealth Services at the Cardinal Point, a cross-border wealth management organization with offices in the United States and Canada. John specializes in providing Canada-U.S. cross-border financial, investment, tax, transition, and estate planning services.

This piece is for informational purposes only.

Covering Your Assets: Risk Management and Your Cross-Border Move

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In a recent blog post, we looked at important issues to consider when making a cross-border transition to Canada or the U.S. We touched upon the need to review risk exposure to ensure your current risk management strategies remain appropriate and new strategies are implemented as needed.

riskassessmentRisks are a part of everyday life, but some risks can have a devasting impact on what you’ve worked so hard to accumulate over your lifetime. Events such as a sudden illness, a car accident, or the death or disability of a working spouse can lead to a severe reduction of your assets. But what specific questions should you ask to help ensure you’re protected? Here are a few to consider:

  • When making a transition to the United States or Canada, what coverage will your current healthcare insurance provide? Will you be out of network? Will you need that coverage?
  • If you’re an American transitioning to Canada, will Medicare cover you or are you eligible for Canada’s universal healthcare system? If you’re a Canadian moving to the U.S., can you keep your Canadian coverage or will you be eligible for the U.S. healthcare system, including Medicare? How will recent changes to U.S. healthcare affect your specific situation?
  • Your life insurance coverage may be sufficient prior to your move, but what effect could the exchange rate have on any death benefits you’re paid after your move? Will your life insurance needs be higher or lower after your cross-border transition?
  • The same issues that apply to life insurance also apply to disability insurance. Will your policy still pay if you make a cross-border transition?
  • How will a cross-border move to the U.S. or Canada impact your auto and homeowner insurance coverage? What are the differences between U.S. and Canadian auto and home policies?
  • What are the cross-border ramifications if you can no longer perform certain daily living activities and require skilled nursing care?
  • As these questions show, making a cross-border transition brings with it the potential for new risk exposures. Will you be prepared?

Whether you’re planning a work-related move to Canada or seeking to adopt a “snowbird” lifestyle in the U.S., it’s always prudent to do the requisite planning ahead of time. The cross-border specialists at Cardinal Point Wealth Management can help you work through the specific areas of risk exposure when making a move to the U.S. or Canada.

Terry Ritchie is the Director of Cross-Border Wealth Services at the Cardinal Point, a cross-border wealth management organization with offices in the United States and Canada.  Terry has been providing Canada-U.S. cross-border financial, investment, tax, transition, and estate planning services to affluent families for over 25 years.  He is active as an author, speaker and educator on international tax and financial planning matters. https://cardinalpointwealth.com/