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Moving to Canada Amidst COVID-19

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It has been well over a year since the onset of the pandemic changed the way we conduct business, socialize, and attach wearable accessories to our rear-view car mirrors to protect others in public forums. At a minimum, there has been a disruption to one’s “normal” lifestyle, and unfortunately for others, they’ve lost someone they love.

The travel industry was hit hard as many people put off their plans to see family and friends. Depending on the country, conflicting pandemic protocol made it challenging to ascertain the best avenue to attend a relatives wedding, be with a sick parent, or even go to a loved-one’s funeral. This article focuses on the current protocol in place when a U.S. resident intends to visit Canada. These circumstances are subject to change, as the situation at the border remains fluid.

Are you eligible to enter Canada?
You have a right to enter Canada if you are a Canadian citizen or a permanent resident of Canada. Foreigners, including U.S. citizens, are allowed to travel to Canada only if they are eligible. The most common eligible reasons align with joining an immediate or extended family member of a Canadian citizen or permanent resident who plans on staying in Canada longer than 15 days (after all, the minimum quarantine period is 14 days).  For less common scenarios, visit: https://www.canada.ca/en/immigration-refugees-citizenship/services/coronavirus-covid19/travel-restrictions-exemptions.html.

The Quarantine Act
If you enter Canada, you are subject to the emergency order Canada placed under the Quarantine Act. This applies to all travelers arriving in or returning to Canada. Its purpose is to slow the spread of COVID-19. Failure to comply with this order is an offense under the Quarantine Act. Whether arriving by air or land, you must provide necessary information and undergo a screening process by border services or quarantine officers to assess symptoms. If symptoms are present, there will be a mandatory 14-day isolation period. For travelers without symptoms, you must self-isolate for 14 days. There are separate protocols for arriving by air or land. Under the Quarantine Act there is no practical difference between a 14 day mandatory isolation and a 14 day self-isolation.

By Air
People who travel by air, regardless of citizenship, will need to follow testing and quarantine requirements to keep Canadians safe, particularly given the new COVID-19 variants in Canada and around the world. At this time, you may only enter Canada through Vancouver, Calgary, Toronto, or Montreal if traveling by air. Furthermore, you will need to monitor the following protocol:

  1. Before you travel
    • Create and assess your quarantine plan prior to travel.
    • Obtain documentary proof of an acceptable (not an antigen test) pre-entry COVID test with a negative result within 72 hours of scheduled departure. See “Accepted types of tests” on this website: https://travel.gc.ca/travel-covid/travel-restrictions/flying-canada-checklist/covid-19-testing-travellers-coming-into-canada. Be ready to present that document at the airport. If you had the virus, you may continue to test positive for a long time; in order to embark, you must provide proof of a POSITIVE result for a test taken in the 14 to 90 day window before the scheduled flight.
    • Reserve your three-night hotel stopover. Furthermore, all costs associated with your hotel stay will be your responsibility.
    • Via the ArriveCAN app, submit your travel and quarantine plans.
  1. Boarding your flight
    • Have your ArriveCAN receipt and pre-entry test results ready to provide to the airline.
    • Check the requirements for boarding a flight to Canada.
  1. Arriving in Canada
    • Have your ArriveCAN receipt, test results, hotel confirmation, and quarantine plans ready for assessment by a Border Services Officer.
    • Take a Covid-19 test on arrival at the airport.
    • Go straight to your pre-booked hotel for up to three nights to await results from your arrival test.
  1. Completing your hotel stopover
    • The timing of your departure from the hotel will hinge upon the results of the arrival test taken at the airport.
    • If results are negative, you will continue on to your final destination where you will serve the rest of your quarantine period.
    • If results are positive, stay in your room until you receive a phone call from a Public Health Agency of Canada (PHAC) representative for further instructions. PHAC makes no promises as to when you will receive that call. There is anecdotal evidence that if you have no symptoms you will remain in the hotel, at your expense, and continue taking tests periodically until one comes back negative. There is other anecdotal evidence that you would be moved to another (less pleasant) location for a thorough medical review.
  1. Completing your full quarantine
    • You must follow specific protocol to get from the hotel to your quarantine destination venue.
    • On day 10 of your 14-day quarantine, you will be required to take another test. You must stay in your place of quarantine while you await the results from this test.
    • If test results are negative, you may leave your place of quarantine after Day 14.
    • If test results are positive, you must isolate yourself for 14 days beginning on the day you took the test. A PHAC representative will call you.

Note: For complete Quarantine protocol and requirements necessary to fly back to Canada, visit: https://travel.gc.ca/travel-covid/travel-restrictions/flying-canada-checklist and read through all steps.

By Land
Although arriving by land still requires careful planning, you would forego the need to stay in an approved hotel location while you await results of your COVID test taken at an airport (Vancouver, Calgary, Toronto & Montreal). You would still need to abide by the following protocol with a land port of entry:

  1. Before you travel
    • Create and assess your quarantine plan prior to travel.
    • Obtain and receive proof of an acceptable pre-entry COVID test taken within 72 hours prior to arrival into Canada (cannot be an antigen test). Or if you recovered from the virus and continue testing positive, you must provide proof of a POSITIVE Covid molecular test conducted in the 14 to 90 day window prior to the date you seek to enter Canada.
    • Use the ArriveCAN app to submit your travel and quarantine plans.
  1. Arriving in Canada at a land border crossing
    • Have your ArriveCAN receipt, test results, and quarantine plans ready for assessment by a Border Services Officer
    • Receive your arrival and Day-10 COVID test kits.
    • Complete your arrival test at the border if testing stations are available on site.
    • Follow the instructions for driving to your place of quarantine.
      • Must wear a mask and social distance at all times.
      • Avoid stops and contacts with others.
      • Use and remain in a private vehicle where possible.
      • Pay at the pump for gas and use drive through when you need food.
      • Sanitize hands frequently and avoid touching surfaces.
    • At your quarantine site:
      • Register your kit by phone or online according to the instructions in the kit.
      • Setup an online appointment with a health care professional who will guide you through the testing procedure to make sure you do it correctly.
      • Follow the instructions in the kit to arrange for pickup of your sample for delivery to the laboratory.
      • Even if you get a negative result, you must remain in quarantine for the full 14 days.
      • If you test positive, you must self-isolate for 14 days beginning with the day you took the test. A PHAC representative will call you with further instructions.
      • On Day 10 of your quarantine, take the second test following instructions provided with the kit. The same rules regarding positive and negative results apply.
  1. Completing your mandatory quarantine
    • Your quarantine begins on the day you arrive in Canada.
    • Your quarantine ends 14 full days later assuming you have received your negative Day-10 COVID test result.
    • If you begin to show signs or symptoms within the 14 day period, an additional 14 days of isolation is necessary.
    • Use the ArriveCAN app to check in and report daily.

Note: There are no exemptions for vaccinated travelers, at this time. For complete Quarantine protocol requirements for a land crossing, visit: https://travel.gc.ca/travel-covid/travel-restrictions/driving-canada-checklist and read through all steps.

Note that PHAC is aware that erroneous test results happen and that there are faulty test kits. No system is perfect. If you test positive, you have no symptoms, and you believe there has been a mistake, then explain your position to the PHAC representative when he/she calls in response to the positive result. You are your own best advocate.

In conclusion, if a visit or move to Canada is imminent, prepare yourself for protocols at the Canadian border well in advance. As these procedures are constantly in motion, contact Cardinal Point for further information regarding your cross-border wealth management and lifestyle endeavors.

Cross-Border Concerns for Athletes

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Canadian hockey players in the NHL who play for American teams have specific planning needs and require the specialized advice of a cross-border financial advisor. This article by Cardinal Point’s Terry Ritchie looks at what cross-border issues professional athletes may face, including immigration, estate, tax and investment planning considerations.

Ritchie first examines the potential immigration pitfalls for athletes living and playing across the border. It’s important for these athletes to work closely with their advisors and immigration counsel to secure or extend their U.S. work visas, apply for permanent residence with a U.S. Green Card, or ultimately become a naturalized U.S. citizen. Ritchie illustrates potential immigration issues with a case study of an athlete who faced these hurdles and partnered with his advisors and immigration attorney throughout the long, complicated immigration process.

The article goes on to look at the onerous tax consequences that can come with expatriating back to one’s home country after an athletic career in the U.S. The dreaded U.S. Expatriation Tax holds that a player who has a U.S. Green Card for more than eight years is classified as a long-term resident and could potentially face a significant two-fold tax hit when leaving the U.S.

Ritchie goes on to illustrate some of the woes that can come when advisors lead their athlete clients to bend compliance or CRA rules. He uses a case study to show how compliance violations can also result in a number of adverse Canadian and U.S. income tax problems. Finally, the article looks at the need for estate planning if a player is domiciled in the U.S., marries a U.S. citizen, has children in the states, and/or has non-U.S. beneficiaries.

O Canada! A Very Brief Primer on Canadian Immigration and Citizenship

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move-to-canada According to the most recent data from the Association for Canadian Studies in the United States, more than 11,000 Americans moved to Canada in 2008. While some Americans dream of such a move, others view it as an act of treason on the U.S. Regardless of your point of view, immigrating to Canada and pursuing Canadian citizenship can be confusing.

What are the basic, long-term options for living and working in Canada? Living year-round or working at any time in Canada requires either the proper permit or Canadian citizenship. In the long term, those who aren’t citizens should decide whether to seek a temporary work permit, permanent residence, or citizenship. Considerations include tax implications, cost of living, health care, and lifestyle issues.

A Cautionary Tale

We’ve seen too often how a lack of planning in this area can result in unfortunate consequences. Take this case study as an example. Our new client had accepted a teaching position at a Canadian college but his initial immigration strategy hadn’t addressed the work permit situation for his spouse. While he was able to work in Canada, his spouse was left at home in a new city and country because she was unable to work. The lack of family or support structure added to the strain, and within a year, the couple contacted us to assist with their transition back to the U.S.

Our couple illustrates the importance of planning early and working with a knowledgeable professional who can help design your Canadian immigration strategy from beginning to end and achieve your goal of attaining temporary or permanent residence or citizenship.

Status in Canada

Generally speaking, there are three categories of “status” in Canada:

  1. Temporary Residents: This category consists of anyone who is not a permanent resident or citizen, including all visitors (for a maximum of six months), foreign workers, and international students.
  2.  Permanent Residents: Those in this category can work and study in Canada with no restrictions and also have the right to enter and stay in Canada indefinitely. The five sub-categories of permanent residents include: Family Members, Skilled Workers/Professionals and Investors, Entrepreneurs and Self-Employed Personas, Provincial Nominees, and Quebec-Selected Skilled Workers.
  3.  Citizenship: In most cases, children who are born in Canada will be Canadian citizens, regardless of their parents’ status. Otherwise, one must become a permanent resident to be eligible to apply for Canadian citizenship. Canada does allow for dual citizenship, in which a person can be granted Canadian citizenship without having to give up his/her U.S. citizenship or passport.

Of course, the points above discuss Canadian status in the broadest of terms. The cross-border specialists at Cardinal Point Wealth Management can conduct a detailed analysis of your particular situation to help determine the best immigration strategy to achieve your needs and goals.

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. www.cardinalpointwealth.com

9 Essential Elements of Cross-Border Transition Planning

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united-states-canada-flags“How do I move my financial life to another country?” It’s a question we hear from many clients as they begin making a cross-border transition. Whether you are making the move to the U.S. or Canada, you want to transition your finances smoothly and seamlessly while saving time, headaches, and every dollar you possibly can.

Much like financial planning, transition planning is a process and not a transaction or an end in itself. And like financial planning, the most effective transition planning hinges on a clear understanding of what you want to achieve in terms of lifestyle both now and in the future.

One of our key roles as cross-border financial planners is to learn where you are trying to go (aka, your goals and objectives) and then design a detailed plan to test the viability of your goals/objectives and ultimately get you to your destination. After all, without a flight plan, how can you know which direction to go?

Our firm’s Canada-U.S. transition planning focuses on 9 key areas that should be considered when making a move across the border:

  1. Customs Planning: This element addresses the process of relocating your assets to Canada or the U.S. Transporting belongings such as cars, pets, guns or other valuables across the border brings up specific issues that need to be sorted out ahead of any move.
  2. Immigration Planning: Whether it’s temporary or permanent, moving to and living and working in Canada/U.S. has legal ramifications. Immigration planning covers all the legal means of crossing the border.
  3. Cash Management Planning: This area includes the development and analysis of your net worth statement and an assessment of your cash inflow/outflow during your move. Our team can look at the ownership of your assets (whether between spouses or between the U.S. and Canada) and calculate a variety of financial ratios to see what challenges or opportunities arise. Your net worth statement is a benchmark from which we can analyze the impact of your move over time. We can also focus on the cross-border transition of cash and offer strategies to simplify your financial life before your move. This includes developing a prudent, purposeful and ongoing approach to currency conversion and foreign exchange.
  4. Income Tax Planning: When making a cross-border move, a comprehensive review of your current and prospective tax situation is crucial as it can reveal strategies to reduce your tax liability before and after your move. Effective tax planning reviews various techniques that may apply to your situation—including tax planning strategies that are state and province specific—all with the aim of curbing your tax liability.
  5. Independence Planning: Will you have enough money to sustain your retirement lifestyle through the decades? Independence planning uses current assets, income, and expenses to create detailed projections that help determine the long-term achievability of your financial and lifestyle objectives. Such analysis can provide valuable insights into which actions, if any, may be needed to attain your goals.
  6. Education Planning: This element looks toward the future to determine: how much is required, at what point in time, and what you need to do to fulfill future education goals. This planning can also include a review of your cross-border education savings options and what to do before a move.
  7. Risk Management: Catastrophic events such as fire, theft, illness, disability or death could devastate what has taken a lifetime to build. Risk management looks at your current exposure for risk and determines the most prudent course of action to address such risk. There are numerous differences in the way risk is managed in the U.S. and Canada. When making a cross-border move, it is vital to ensure you will be fully covered.
  8. Estate Planning: Estate planning assists in establishing order to your affairs so that you can: 1. continue to control your property while alive, 2. provide for the needs of loved ones should you become disabled, and 3. leave what you have to whomever you want, in the way that you want, and at the lowest overall cost.
  9. Investment Planning: This area focuses the investment objectives you established in your financial plan and then develops an investment portfolio to achieve your desired rate of return while also managing for tax liability. An essential part of the transition planning process is developing a properly structured and integrated investment strategy that includes your investment accounts on both sides of the border.

Are you ready to begin the transition planning process? Whatever your goals and needs are, the experts at Cardinal Point Wealth Management can help ensure a smooth road to your cross-border destination.

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. www.cardinalpointwealth.com

U.S. Estate Planning for Non-Citizen Spouses

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Avoiding the estate tax when you’re married to a foreign national

As cross-border specialists, one of our key concerns in working with each client is the question of citizenship. This is especially true for estate planning, as developing a plan without taking into account citizenship could have dire tax consequences and create hardship for a surviving spouse.

According to current estate tax law, an immediate tax can be enforced on assets passed to a spouse who is a foreign citizen. Cross-border estate planning plays an important role in preventing a hefty tax bill due to these U.S. estate tax rules. If you’re in a similar situation, here’s what you need to know.

Estate Planning Basics
When we work with a married couple to develop an estate plan, one of our key goals is to preserve and protect assets for the surviving spouse and children. Fortunately, with advanced planning, federal estate taxes can often be reduced or avoided.

Currently, if you die with a taxable estate worth over $5.34 million, the IRS can take 40% of the excess. One common approach to avoid this federal estate tax rule is to give away some of your assets to children and grandchildren upon your death, either directly or through trusts, with the remainder going to your surviving spouse. You can bequeath an unlimited amount to your spouse free of federal estate taxes—as long as your spouse is a U.S. citizen.

You can also gift away an unlimited amount to your spouse before you die without incurring a federal gift tax if he/she is an U.S. citizen. This ability to make unlimited, tax-free wealth transfers to your spouse is known as the “unlimited marital deduction.” This privilege is an essential part of many estate and gift tax planning strategies.

The Citizenship Conundrum
Unfortunately, traditional estate tax planning strategies that work for most married couples—such as the unlimited marital deduction—are not available when one spouse is not a U.S. citizen. In 1988, the U.S. Congress eliminated the unlimited marital deduction for when a U.S. citizen spouse passed property to a surviving non-citizen spouse. This has resulted in a significant dilemma and substantial federal estate tax rates for those leaving assets to a spouse who doesn’t hold U.S. citizenship. Further, when the marital transfer rules changed, a new rule was also introduced that limits the annual transfer of assets directly to a noncitizen spouse without incurring any tax.

Let’s look at an example to see the impact this would have. Let’s say a U.S. citizen husband passes away, leaving $5.34 million to his children and the remaining $1.5 million to his non-citizen wife. Given the $5.34 million federal estate tax exemption, the amount left to the children is free from federal estate taxes; however, the $1.5 million left to the non-citizen spouse is not exempt. What’s the damage? $600,000 ($1.5 million x 40%) in federal estate taxes! Let’s say the husband leaves his entire estate worth $6.84 million to his non-citizen wife. The federal estate tax is still $600,000 because the initial $5.34 million is protected by the federal estate tax exemption.

Another problem that arises is that U.S. assets bequeathed to a surviving non-citizen spouse using the estate tax exemption may still be subject to estate taxes upon the death of that non-citizen spouse. This is because a non-citizen spouse who is not “domiciled” in the U.S. will only have a $60,000 lifetime exemption instead of the $5.34 million exemption.

Planning Options
What are some estate planning options if you or your spouse don’t qualify for the unlimited marital deduction? Let’s return to our example.

For starters, our married couple could take steps to have the wife become an American citizen before her husband’s death. Another alternative is to set up a Qualified Domestic Trust (QDOT), which would enable our couple to defer the estate tax until the death of the surviving non-citizen spouse. How does it work? A QDOT allows for assets to be held in trust for the noncitizen spouse without incurring an estate tax, thereby putting off taxation until the spouse’s death or assets are withdrawn. This would also provide an annual income stream for the wife and allow extra time for her American citizenship to come through. Under the Canadian Income Tax Act, a properly structured QDOT can also qualify as a spousal trust.

If certain qualifications are met, another cross-border approach we take with our clients is to look at the marital credit of the U.S./Canada Tax Treaty. It’s important to note that this route and the QDOT option cannot be used together.

Another consideration is to introduce a gifting strategy where the husband gifts property to his wife; as much as $145,000 per year would be allowable as a tax-free transfer under current tax law. Such gifts can help reduce the amount of assets passed to a non-citizen spouse and also help mitigate tax issues down the road.

In addition to these options, there are a number of cross-border planning approaches that can be established in advance as part of a total financial planning process. Life insurance, real estate and retirement plans should all be examined to look at opportunities to protect assets from taxable events upon death.

We advise families that a careful, advanced planning approach is the key to avoiding potential pitfalls when a spouse is not a U.S. citizen. After all, one of our most essential roles as an advisor is to help minimize the negative impact of estate taxes for a family and a surviving spouse dealing with the loss of a loved one.

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. www.cardinalpointwealth.com