In this article, Cardinal Point’s Terry Ritchie looks at new tax changes that took effect on October 31. The IRS released inflation adjustments for more than 40 tax provisions, including the 2014 tax rate schedules and other rates, exemptions and changes. In particular, advisors with U.S. citizens as clients, or those who help Canadian clients who own U.S. property/shares, should look at the U.S. estate tax exemption for 2014.
Cardinal Point Wealth Management, Inc. announced today that it has acquired Seabank Capital Management Inc. With the addition of Seabank Capital, Cardinal Point continues to establish itself as the leading provider of cross-border wealth management solutions for residents of Canada and the United States.
Cardinal Point Wealth Management, Inc. is a Canadian-based, fee-only financial planning firm that specializes in assisting affluent individuals and families in the U.S. and Canada with their domestic and cross-border financial planning. The firm is part of the Cardinal Point Group of Companies, which also includes Cardinal Point Wealth Management, LLC, a provider of investment, financial and cross-border planning services in the U.S.
Seabank Capital Management Inc. is a Vancouver-based boutique investment firm. Seabank specializes in providing cross-border advice and investment management services to citizens and ex-patriots living in Canada and the U.S. The firm is a registered investment advisor in the U.S. and a registered portfolio manager in Canada.
“Under Dan Walkow’s leadership, Seabank Capital has long delivered customized portfolio management solutions of the highest caliber to their clients. We are thrilled to have a professional of Dan’s talent join the Cardinal Point team,” said James Sheldon, Chief Executive Officer of Cardinal Point.
According to Seabank Chief Investment Officer & Managing Director Dan Walkow, “We believe that bringing Cardinal Point and Seabank together will synergize our operations and ultimately provide clients with a more robust firm. We are excited to leverage the combined strength and expertise of both businesses.”
This acquisition reinforces Cardinal Point’s commitment to and presence in the cross-border arena. There has been a dramatic rise in demand for financial advice and guidance for individuals with assets on both sides of the border or who are transitioning between the U.S. and Canada. The firm plans to continue to expand its operations throughout the U.S. and Canada to meet this growing demand for its specialized solutions. Cardinal Point Wealth Management Inc. now has offices in Toronto, Calgary and Vancouver, while Cardinal Point Wealth Management, LLC has offices in Irvine and Boca Raton.
Very few firms today provide a truly integrated Canada-U.S. investment strategy and have the personnel in place to deliver personalized financial planning solutions. Through its acquisition of Seabank Capital, Cardinal Point further strengthens the firm’s unique ability to help investors manage their wealth on both sides of the border.
Recently, Jeff Sheldon and Terry Ritchie were featured in Advisor.CA to discuss the topic of divorce. Divorce can disrupt even the most solid financial plan, especially when cross-border considerations are involved. We’ve seen many planning cases where one person moves from Canada to the U.S. or vice versa for marriage. For those clients, the tax impact can be significant. Identifying the type of assets for distribution, their locations and the cost basis of non-retirement plan assets are all critical.
Property transfer due to divorce could have differing Canadian/U.S. tax results. Per U.S. transfer rules, unintended gift taxes could be imposed based on the spouses’ tax residency and citizenship. To find out what will happen if clients transfer property to each other, first determine if one spouse is a non-resident alien (NRA).
U.S. citizens are considered U.S. residents for a range of tax purposes, no matter where they generate/receive investment income, hold/transfer assets, or die. An NRA is generally subject to tax on U.S. source income and some types of U.S. investment or pension income. However, under the Canada-U.S. Tax Treaty, one may withhold taxes at source to address this obligation.
Canadian income tax doesn’t apply upon the sale of real estate as part of a divorce settlement. However, if one/both spouses are U.S. citizens, U.S. income tax could apply upon the sale/transfer. A U.S. tax resident can exclude up to US$250K of his share of the gain from U.S. income tax if certain qualifications are met.
It may be difficult to collect spousal and child support between both countries. Using Maintenance Enforcement may sometimes help. If paying alimony to a previous spouse who now lives in Canada, the U.S. citizen payor can deduct this amount under U.S. tax rules with documentation.
Cardinal Point Wealth Management Inc. (“Cardinal Point”) is pleased to announce that Terry Ritchie has joined the firm as Director, Cross-Border Wealth Services.
With a wealth management career spanning 25 years, Ritchie brings substantial experience in the areas of financial, investment, tax and estate planning. Ritchie specializes in assisting affluent individuals and families with their Canada-U.S. cross-border financial planning complexities.
“Terry brings a very specialized set of skills to our firm,” said James Sheldon, CEO of Cardinal Point. “There are very few individuals in our industry with his cross-border financial planning knowledge and experience.”
At Cardinal Point, Ritchie will lead the Canada-U.S. cross-border wealth services division, which focuses on providing clients with comprehensive cross-border investment, financial, tax and estate planning and transition planning solutions. Prior to joining Cardinal Point, Ritchie owned and operated his own cross-border financial planning and tax practice.
“Ritchie’s ability to address the most sophisticated cross-border wealth management complexities is what separates him from a traditional, domestically-based financial planner,” adds Sheldon. “With the addition of Ritchie, our cross-border clientele will gain access to a thought leader whose advice has assisted generations of cross-border families over the years.”
Ritchie is a Registered Financial Planner (RFP) in Canada, enrolled to practice before the U.S. Internal Revenue Service (IRS) as an Enrolled Agent (EA). He is also a Trust and Estate Practitioner (TEP) affiliated with the Society of Trust and Estate Practitioners (STEP). He graduated with a Bachelor of Science in Finance from Arizona State University. He is active as an author, speaker and educator on international financial, tax and estate planning matters.
Our own Jeff Sheldon was recently featured in a Wall Street Journal article, “A Cross-Border Retirement Without Tax Woes.” He shared the story of a couple who retired to the U.S. from Canada. While they sought sunny weather and a simpler life, when it came time to sort out their taxes and streamline their retirement investments, they were confronted with a cloudy, complicated situation. Adding to the challenge, “the wife was a Canadian citizen, the husband held dual citizenship in Canada and the U.S., and the couple owned retirement plans, property and other assets on both sides of the border.”
What to do? After other advisors told the couple to liquidate their Canadian retirement accounts and transfer those assets to U.S. accounts, the couple turned to the cross-border expertise of Cardinal Point. Jeff was concerned that such a move would subject those assets to double taxation, first as a withholding tax in Canada and then again as taxed income in the U.S. Fortunately, he came up with a solution that enabled the couple to avoid being taxed twice while still receiving funds from their tax-deferred Canadian retirement accounts.
Then Jeff identified a significant issue with their estate plan. “[T]he husband’s estate was considerably larger than his wife’s. That ordinarily wouldn’t be an issue, but the wife isn’t a U.S. citizen and isn’t eligible for the unlimited marital exemption.” As a result, the wife would owe estate taxes on what she inherited from her husband. To prevent this, Jeff employed two strategies to help ensure she wouldn’t owe estate taxes on that money.
As with many cross-border moves, there were no “one size fits all” solutions to fit the couple’s complex financial, tax and estate planning needs. It wasn’t a quick fix, but our tailored advice helped the couple worry less about their retirement and enjoy more Florida sunsets.