Whether it is a snowbird wanting to spend more time in the US, someone hoping to move closer to family, or a career opportunity that takes one abroad; more and more Canadians are considering the option of making the move to the US. With many desirable climates, affordability of real estate and the relatively low tax rates, the move can make sense for many individuals. However, it is important to consider the complexities that are involved anytime a move to another country is being contemplated. Canadians who are considering or who have made the decision to move can rely on the experts at Altro LLP’s affiliated entity MCA Cross Border Advisors to help them navigate the path ahead and create a cross border plan to help ensure the move is efficient, effective and free from costly errors.

Without careful planning, the Canadian moving to the US can encounter numerous adverse and unintended consequences that can prove to be costly. In addition, many unique planning opportunities present themselves within a cross border move and it is our firm’s unique expertise that can help unlock the full potential of these opportunities.

Whether still considering the benefits of a move or even if the decision has already been made, an overwhelming list of questions comes to mind. Am I eligible for a visa/green card? How much Canadian departure tax will I owe? Can I obtain health care coverage? What do I do with my Canadian RRSP? What about my other investments, who will manage them in the US? What is the impact to my Canadian pensions? Will I be subject to US estate tax? What happens to my Canadian will? Can I still provide for my heirs who remain in Canada?

Not only will working with our cross border financial planning team help answer all of the questions that arise, a cross border financial plan will ensure each individual situation is optimized and meets your cross border lifestyle goals.

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Canadian Departure Tax

There are many tax implications to be analyzed when considering a cross border move, not the least of which is Canadian Departure Tax. For assets subject to this tax, they are deemed to be disposed of at their current fair market value. This results in the realization of any accrued gains prior to emigration, leading to potential capital gains tax. This is referred to as a deemed disposition as no actual disposition has to occur. Even when no sale has occurred, the assets are deemed to be disposed, resulting in the taxation of accrued gains.

Not all assets are subject to departure tax. Canadian real estate, Canadian annuities, RRSPs, RRIFs and Life Insurance are a few of the notable exceptions to departure tax. Non-registered investments, real estate held outside of Canada, certain personal property and stocks of privately held corporations are examples of property that is subject to departure tax.

Departure tax can lead to a potentially large tax liability, this highlights the need for careful planning to ensure these impacts are understood and mitigated where possible. The experts at Altro LLP’s affiliated entity MCA Cross Border Advisors help address these concerns with clients and alleviate any uncertainty that the Canadian departure tax may cause.

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US Pre-Entry Tax Planning

Without proper planning, a Canadian moving to the US may encounter many adverse and often unanticipated tax consequences. In addition, without expert advice, the Canadian moving to the US may miss out on many tax savings opportunities unique to the cross border situation.

Tax residency is an often-overlooked factor for the cross border move. If pre-entry planning is not undertaken to plan for the most effective tax-exit date from Canada, unintended adverse tax impacts can be the result.

Also, it is possible to effectively be considered a tax resident concurrently in both jurisdictions. While the Canada-US Tax Treaty does mitigate most risks of double taxation, a lack of planning can lead to ultimate tax residency decision being taken out of your hands and into the hands of a series of tiebreaker rules. With this lack of control, the ability to effectively plan and optimize can be lost; resulting in added taxes, time and uncertainties.

Not only does proper pre-entry tax planning help avoid many of the costly pitfalls that are possible, it will also ensure the optimization of each individuals situation by utilizing all available tax planning opportunities. Altro LLP’s affiliated entity MCA Cross Border Advisors works with clients to explore tax-planning opportunities specific to their situation, such as strategies that enable individuals to utilize any accrued losses on non-registered investments twice. Further planning opportunities exist with registered investments that may allow for the withdrawal of these assets at a reduced tax rate, resulting in significant tax savings.

Our MCA Cross Border Advisors financial planners are well versed in the pertinent factors that are relevant for Canadians moving to the US. Pre-entry tax planning is one of many important areas of a complete cross border financial plan necessary to ensure a smooth and efficient transfer of you and your wealth to your new home.

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US Domestic Estate Planning

Canadians who take up residency in the US are faced with an additional challenge not faced in Canada, US estate tax. All US residents are subject to US estate taxes, leaving opportunities for Canadians about to take up tax residency to structure assets in a way to remove them for estate tax calculation purposes. With a transition cross border, the likely transition of many assets will take place. This will impact the effectiveness of any current estate planning in place and require a thorough analysis of estate planning goals moving forward.

Canadians who move to the US can be faced with challenges unique to them as new immigrants. Normally, spouses in the US benefit from an unlimited marital deduction allowing for an effectively tax-free transfer of assets to a spouse on death. An important exception applies, relevant for Canadians moving to the US, the unlimited marital deduction only applies to US citizens, not permanent residents. There is a provision that allows permanent residents to utilize a double-up of the unified estate tax credit when transferring assets to a spouse. While this does effectively protect many, this lack of the unlimited
marital deduction could require additional planning and the use of different trust vehicles to optimize the estate transfer. Our expertise lies not only in effective US estate planning, but effective US estate planning for the Canadian moving to the US.

Depending on the province of residence, probate fees have been something Canadians traditionally have taken steps to avoid or minimize to the greatest extent possible. Probate fees in the US are generally higher than in Canada and the process itself can be quite time consuming, frustrating and costly; resulting in an even greater need to address probate in any effective estate plan.

Our experts address the above concerns for Canadians as they transition to this new jurisdiction. A cross border plan provides an analysis of our clients’ personal situation and formulates potential strategies and structures that can eliminate or minimize estate taxes and probate fees. This is done to minimize the time and effort it can take to process an estate in the US and maximize the value of an estate to transfer to the intended beneficiaries.

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