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Bob Keats' cross-border tips for snowbirds and investors

  • Thanks for joining our live chat with cross-border financial planner Robert Keats. I'm Dianne Nice, community editor for Report on Business. Robert will be joining us at noon to take your questions about living and investing in the United States. You can begin submitting questions now by signing in and adding a comment to the box above.
  • Hi Robert, thanks for joining us today.
  • You're welcome I'm ready to take questions
  • Readers have been wondering what changes, if any, we'll see now that President Obama has won a second term. Can you comment?
  • That is difficult to tell at this time because in actuality nothing has changed we still have Republican house and Democratic President and the Democratic Senate which is what we have now. I I expect and I'm hoping that they will work together to work some solutions out to all of the financial concerns that the US must address. I'm optimistic that this will happen and that it can be done with the least affect to the average person on the street in particular for Canadians doing business in the, moving to the US or just being a winter visitor. I do not expect any significant changes for any of these categories at this time or in the near future.
  • Here's a specific question about health care coverage...
  • Hi, What is Obamacare going to mean for Canadians who move to the US? And, will the provisions for pre-existing conditions apply to to all applicants for coverage or just US citizens?
  • Obama care is a big plus for Canadians moving to the US, particularly those with pre-existing conditions as it will guarantee coverage once they are full-time residence of the US. The cost of the coverage currently is very reasonable and I have given some examples of the costs in my latest book A Canadians Best Tax Haven: the US, Take your Money and Drive.
  • Where is a good place to find information about living in the US?
  • A good place to start is geographically in the areas that you like to visit in the US. Once you pin down the general areas then there are many resources that will apply to that area. There are several books that will help you decide whether it is even feasible and what obstacles you may face moving to the US and obviously what are the advantages of moving to the US, you can see some of these resources on our website or look for some of the books I have authored on The US can be an excellent tax haven for Canadians, particularly in retirement.
  • What's the latest on your efforts to get legislators to consider a special visa for retired Canadians?
  • The retirement visa where there is special consideration being given for Canadians is still in various committees in the U.S. House and Senate. It is unlikely that anything's going to happen during the lame-duck session before the new Congress is sworn in in January. Once the new Congress is sworn in the bills may be reintroduced and carried on from there. I have spoken to several congressmen and other top advisers about this visa and they are pretty much all aware of it but no one could help me to pinpoint if and when something would ever be passed as there are so many other priorities that they need to handle first. I am still reading reasonably optimistic even though I've been pushing for it for more than 20 years to get some kind of a visa next year that allows Canadians to retire in the US without having to get any special work or investment requirements .
  • Hi Robert, for Canadians who want to buy real estate in the US-Florida as an example, what are things we should be aware of?
  • When purchasing real estate in the US there are normally all the standard things one needs to review when buying real estate regardless of its location. You do need to do your due diligence in the US just like any other purchase which you are making in Canada, you should not go on price alone as there are real lot of great buys still available but they may not be the best value for you. One thing that you need to understand when purchasing real estate in the US that there are many different options to title the US property that most Canadians are not aware of and I do recommend you get some help from a cross-border planning specialist to determine the best way to title your property, there is a new website that will help you do that at very low cost, Another consideration is financing if you do want to take a mortgage there are US banks or the US subsidiaries of Canadian banks that are doing mortgage lending at reasonable costs to those that have decent credit ratings. In addition, if you are going to rent out your property you do need to file a US nonresident tax return as well as report that rental income on your annual Canadian return.
  • I'm not sure if this next question is too specific. Is this something you could comment on?
  • We have a cottage in Montana that now has a value of say $600,000. the property is held jointly with my wife. What would the taxes we would have to pay be if we sold in the next few years. Ballpark figure..tks. Brian
  • The only US taxes that you need be concerned about would be if your property had appreciated in value since you purchased it after taking into consideration any improvements you made on the property. If you had, say, a $100,000 capital gain on the property, you and your wife would have a US tax bill of likely less than $10,000. The $10,000 you do pay to the US will be a full credit for any tax you may have on the gain on your Canadian returns so this is not an additional tax, the treaty prevents the CRA from taxing you without giving you credit for taxes paid to the US. There would be a small state of Montana tax as well. You pay the tax by filing a US non-resident tax return, form 1040 NR and you might need some help when you list the property to make sure any withholding tax done by the purchaser is done, if any withholding is required at all.
  • What are the estate tax implications of US investment properties?
  • The Canada/US tax treaty gives Canadians the same exemption that Americans get from estate taxes on their worldwide estates even when purchasing property as a non-resident of the US. Currently the exemptions are $5.1 million per individual or about $10.2 million for a married couple. This is one of the items that Congress needs to review before the end of 2012 because the current exemption is scheduled to be reduced to $1 million per individual. No one wants this lower exemption, Congress just needs to negotiate a new rule that either renews the current exemption or some other number, most professionals expect the new exemption to be somewheres between 3.5 million-$5 million per individual. Consequently if you and your wife have a worldwide estate under $10 million you should not have any US nonresident estate tax to be concerned about. You do need to check with the state where the property is located as sometimes there are few states that actually have their own estate tax and since US states are not part of the US/Canada treaty there may be some tax there.
  • A reader points out that the title service link you mentioned is not working. Is there another you could recommend?
  • I typed in and nothing came up.
  • I will check on the correct web address and get back to you before the end of the session
  • how does a Canadian get hit with tax when (s)he moves back to Canada and transfer her/his 401(k)?
  • The best thing to do with a 401(k) plan or other US Individual Retirement Account type plans if one is moving back to Canada from employment in the US is to convert this plan to a Roth IRA. A Roth IRA will provide you tax-free income for the rest your life to you in Canada once it is converted providing the conversion was done before you returned to Canada. You should get some professional help with the planning of the Roth conversion because there are several tricks of the trade so to speak that will help you minimize any US taxes you will pay on the Roth conversion as it can be taxable in the US so you want to make sure that you pay the least amount of tax possible to obtain the tax-free benefit for the rest of your life and also you can pass it on to your children and they can get tax-free income from of their lives if you die with some balance left in your account. This is one of the best opportunities a Canadian can get from US registered/qualified type plans as otherwise Canada will tax you on the entire amount of withdrawal, once you are back in Canada , usually at the higher Canadian rates if you go back to Canada without converting to the Roth IRA. The tax savings here over a lifetime can be incredible so it is important to spend the right amount of time doing the planning correctly from a qualified cross-border planner.
  • What is the best way to transfer some US property to an offspring, when both parties are US citizens?
  • The correct website for the title website is
  • I will answer the question on the best way to transfer property toUS offspring when both parties are US citizens.

    I'm assuming that you are US citizens resident in Canada or that the beneficiary is Canadian. If that is the case it is normally best to do it through some form of a living trust that holds the title to the property and therefore when the owners pass away the trust automatically transfers to the children without probate without any legal costs. These trusts can also be set up to take advantage of the US lifetime estate tax exemptions so that there is no estate tax to pay on the transfer providing the estate is less than the e US xemptions at the time of death
  • One of the big challenges facing Canadians looking to invest in the U.S. is that it can be difficult to borrow money which means that you need bring your money with you. Do you see any improvement forthcoming in the ability of U.S. banks to tap into Canadians' credit information so as to make it easier for Canadians to get loans and mortgages?
  • Good question as that is changing quite positively due to demand from other Canadians such as yourself. We have spoken to several US banks that have special Canadian loan officers that can deal with the Canadian issues and loan to Canadian residents. However, the Canadian banks like Bank of Montréal and the Royal Bank both have excellent mortgage choices for US properties for Canadian residents through their U S subsidiaries. You can contact the banks in the US directly or if you want specific contact information please email me off line and I will have someone provide you with the direct contact information.
  • Hi Robert, as a young Canadian with dual citizenship do you think it would be a worthwhile investment to purchase a rental property down south and continue to rent or better to just focus on purchasing my first home in Canada and look at rental properties down the road. Thanks
  • From a straight financial planning point of view I would normally recommend that you purchase your own personal use property that you will actually live in first to qualify for both the tax-free capital gains in Canada and the US on a personal principal residence. Your being a US citizen will allow you to do whatever you want in the US but that is a separate issue from the decision of what type of property to buy first. Being a US citizen in Canada does require you to understand what the IRS wants you to do with respect to filing annual US tax returns.
  • Are there any significant differences between the US and Canada in terms of the actual process of buying and selling a property (e.g., the offer and sign back, conditions that can be stated, etc.)? Is it regulated federally or by state? Thanks.
  • There are significant differences when purchasing US property and there are several terminologies and practices that Canadians would not be familiar with. Your realtor can be a great source of interpretation of how everything is done particularly if you get a transplanted Canadian in the US as as a realtor. Also the bankers like the Royal Bank have an excellent information sheet that gives you the terms that you may not be familiar with and defines them and generally gives you the differences between buying and selling in Canada and the US. Most regulations you are going to face in the US when purchasing are going to be State driven so don't assume what works in one state will be applicable in another.
  • We have time for one last question...
  • Two years ago, my wife and I bought a house in Florida. We were advised to put the house in the name of my wife, but since then we have heard about cross border trusts, joint ownership, etc. What is the most tax effective way to own a house in the US if you are a Canadian citizen. Thanks for your help.
  • This is one of the questions that may have different answers depending on the size of your estate and the value of the property you have purchased in the US. Generally speaking if the property is over about $750,000 value a cross-border trust will be worth your while and probably the best option to use. There is significant cost in setting up one of these cross-border trusts but normally there is a better way to title the property than just in one person's name. You can try the Canadian US title service website that I referred to a bit earlier in one of my posts as that will help you at least see whether you should spend the time and money on a cross-border trust.
  • We've had so many great questions from our readers. I wish we had time to get to them all. Robert, your advice is always appreciated. We'll have to have you back again for another chat in the future. Is there anything you'd like to add before we sign off?
  • Thank you for all your great questions and please have a good Remembrance Day and remember all of our veterans.
  • Thanks again, everyone, for joining us today.
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