John McCord s a Vice President and Portfolio Manager. With over 20 years of experience, John employs a holistic cross-border wealth management approach with an emphasis on client service as he oversees the financial planning of affluent families who live in Canada and the United States. He has earned the designation of Certified Financial Planner™ or CFP® from the Certified Financial Planner Board of Standards, Inc., Chartered Investment Manager or CIM® from the Canadian Securities Institute, Chartered Retirement Planning Counselor™ or CRPC® designation from the College for Financial Planning™ and Registered Trust and Estate Practitioner or TEP with the Society of Trust and Estate Practitioners. Prior to his role with Cardinal Point, John advised high-net worth individuals and institutional clientele within E*Trade Financial and the Merrill Lynch Private Client Group. John graduated with his Bachelors of Business Administration with a Concentration in Finance from Roanoke College.
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Possible U.S. Tax Changes for Snowbirds
A sweeping GOP victory has led to both houses of the U.S. Congress being controlled by Republicans. American voters also chose Republican governors in a majority of states. How do these and other recent changes affect snowbirds?
First, there is the so-called “snowbird visa,” which has been held up in the current Senate after passing the House. The new GOP majority could revive the Act, titled Encouraging Canadian Tourism to the United States, which proposes to let Canadians who meet age and residence tests stay in the U.S. for up to 240 days within a calendar year.
Second, three U.S. senators are encouraging closing the border permanently to those who renounce U.S. citizenship.
Third, while it is not likely that the new leadership will call for a change in personal income tax, it will probably address corporate tax avoidance.
However, even before the elections, the IRS announced inflation adjustments for income, gift, estate and expatriation taxes. These affect more than 40 tax provisions. A few of the notable changes include: the tax rate on singles and married couples; standard and itemized deductions; exemptions and Alternative Minimum Tax. Chances are, even before the newly elected officials take office, these and other IRS-mandated changes will have an impact on your taxes, as well as your short- and long-term financial planning.
Advising same-sex couples with U.S. ties
Terry Ritchie, Director of Cross-Border Wealth Services, was recently featured in an article from Advisor.ca looks at how a recent ruling from the U.S. Supreme Court opened the door to new planning options for same-sex partners with ties to the U.S. The June decision struck down a key part of the Defense of Marriage Act and broadened the federal definition of marriage to include legally married same-sex couples. The new definition also applies to American couples who marry outside the U.S.
Following the decision, the IRS released the tax implications: “Same-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor.” The article goes on to give examples of how advisors can help their clients benefit from these changes, specifically in the areas of tax filing, wealth transfer, and principal residence exemption. Read the full article here.
Got Snowbirds? Check These Tax Changes
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.
How to Handle Cross-Border Divorce
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.