Pre-Covid, over 375,000 Canadians regularly travelled to the U.S. every year. With the recent announcement of the US borders opening, many Canadian retirees, affectionately known as snowbirds, will be packing their bags with gusto.
While the news is undoubtedly thrilling to those with US interests, it’s also important to be informed of possible complications that can come with spending a long period of time in the States – especially from a tax planning perspective.
Although many Canadians believe that they are legally allowed to stay in the US for up to 180 days every year without having to file a US tax return, we would recommend that Canadian snowbirds spend no longer than 120 days in the States at a time to avoid tax repercussions.
The reason we urge snowbirds to err on the side of caution is due to a test entitled the ‘Substantial Presence Test’. This test calculates the length of time an individual has spent in the US over 3 years to determine if that person is considered a US resident for tax purposes. So, it is essential for individuals, families, and trusts who are planning to spend time in the US, to seek expert advice and to protect their assets when navigating the US tax rules.
Now is the perfect time to review cross-border personal tax and estate planning with an expert; especially when an increase in U.S. tax is expected soon.
For Canadians who have property or assets in the US and are excited to cross the border soon, MacMillan Estate Planning recommends a variety of strategies to safeguard those assets, including a Canadian Resident Trust to hold US property, especially if it has a value of more than $300,000. This is also recommended if the goal of a client is the transfer the property to a spouse, child, or other family member after their passing because of the US tax implications.
Taking advantage of strategies like this may save you a lot of hassle and time, especially for those looking to travel in the next few weeks. MacMillan Estate Planning’s Paul Lindsey adds that there could be complications not only when looking to protect current assets in the US, but when selling those assets.
“The travel restrictions that have been imposed as a result of the pandemic, as well as the general uncertainty that it has brought, has led a number of Canadians with assets in the United States, particularly real estate, to consider selling those assets and realize their interests in the US, and bring the value back to Canada. Of course, this brings a whole host of additional estate planning considerations upon which proper advice should be sought.”
To find out more about whish estate planning strategies could benefit you and your family, register for our upcoming complimentary webinar, or contact us on 1-833-266-6464.