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Cardinal Point Wealth Management

Your Cross-Border Financial Advisor

Should Snowbirds Live in the U.S.?

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Cardinal Point’s Terry Ritchie looks at new measures to promote longer stays by Canadians in the U.S. The first proposal would let Canadians stay in the U.S. for up to 240 days per year, as long as they are 55 years or older, maintain a Canadian residence, and own/rent property in the U.S. Another provision would allow a Canadian to live in the U.S. for up to three years with a special Z Visa if he/she is over 55, purchases U.S. property for at least $500K (USD), has health insurance, and lives in the U. S. for more than six months. For both provisions, the Canadian could bring a spouse, but could not work in the U.S. For those already owning U.S. real estate, the Z Visa would not apply.

img1It’s also important to consider the income tax, estate tax, and health care implications of these measures. Consider the rules that relate to establishing U.S. tax residency, such as the Substantial Presence Test. Under this test, snowbirds who spend more than 183 days in the U.S. over a three-year-period are subject to U.S. income tax on their worldwide income. Those that meet this test can file IRS Form 8840 so they aren’t subject to U.S. tax, but U.S. tax residents must file IRS compliance forms when they own Canadian companies, bank accounts, investments, and retirement accounts or risk substantial penalties. The article also discusses rules for Canadian mutual funds, RRSPs, RRIFs, and new foreign asset reporting requirements.

What are the implications for U.S. estate taxes? Under the new rules, a Canadian could be subject to U.S. estate taxes on his worldwide estate, including all assets in Canada. The article provides a recent estate tax case to illustrate this. In terms of health care coverage, Canadians who are away from their province of residency for more than 182 days (some provinces vary) may lose coverage, and finding an alternative form may be challenging.

Read the full article here.

As always, we understand that U.S. Canadian Cross-Border issues can be be a challenge to understand, we are here to answer any cross-border wealth management questions you may have.

How Does Canada’s Public Pension Program Compensate Expats Living in the US?

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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?

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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.

Cross-Border Planning Full of Conflict

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This article from Advisor.ca discusses the complexities of financial planning for Americans and Canadians whose lives, assets and interests cross two borders. Cardinal Point’s James Sheldon points out that those in a dual-citizenship marriage or with cross-border assets need financial advice, investment planning, and wealth and estate planning that meet securities regulations in both the U.S. and Canada. Multiple tax jurisdictions need a more sophisticated level of advice, and one of the primary challenges of cross-border financial planning is navigating the big three: the U.S. Internal Revenue Service (IRS), the Canada Revenue Agency (CRA) and the Canada/U.S. Tax Treaty. Given the lack of continuity in how the three deal with assets, there is the potential for double taxation. The article also looks at what to consider in preparing for the Canadian departure tax and what to do with a will or tax-free savings account before making a move.