Financial Planning

Ensure they pack a “border kit” and note provincial health-care limitations

By Tessie Sanci |

Your snowbird clients are probably making plans to head south to the U.S. soon and preparation is key to a stress-free winter away from home. Terry Ritchie, director of cross-border wealth services with Calgary-based Cardinal Point Wealth Management, shares four important tips to pass on to your clients:

1. Check Canadian health-care benefits
Provincial and territorial governments require Canadians to be living within those jurisdictions for certain minimum periods in order for them to be eligible for publicly funded health care when in Canada.

For example, Ontario requires residents to be in province for 153 days per 12-month period; Northwest Territories and Alberta require residents to be present for 183 days.

Each province and territory has its own requirement. Make sure your clients are aware of theirs.

2. Pack a "border kit"
Your snowbird clients should travel with a file containing documents proving they are Canadian tax residents. In addition to usual travel documents, the file should include:
> copies of the client's most recent Canadian tax return or notice of assessment;
> utilities statement (such as a gas or hydro bill);
> proof of ownership of property in Canada;
> if necessary, a copy of U.S. form 8840, filed to the Internal Revenue Service (IRS) to declare the client has a "closer connection" to another country.

3. Change currency
Dissuade your clients from trying to time the currency market when converting their cash, Ritchie says. They need to be prepared to fund their stay in the U.S.

"If you are going to maintain a lifestyle in the U.S. on a consistent basis," Ritchie says, "you need to make sure that you have U.S. dollars hedged for that purpose."

He suggests clients maintain a U.S. bank account, a U.S.-dollar portfolio and U.S. dollars in their RRSPs.

4. Review estate issues
If a Canadian dies while owning more than $60,000 of U.S. property, such as real estate and securities held personally (as opposed to U.S. securities held within a Canadian mutual fund), that property's executor will be required to file a U.S. estate tax return, regardless of whether taxes have to be paid.

Estate tax is paid only if the value of worldwide property (including Canadian property) exceeds US$5.25 million for a sole person. That amount is doubled for a married couple, Ritchie says, if one spouse dies and the estate goes to the surviving spouse. As of 2014, the IRS will increase those limits to US$5.34 million for one person and double that for a married couple, with the condition described above.

Proper estate planning is especially important when one spouse has died and the surviving spouse inherits the estate. The survivor's tax exemption drops to that of a single person.

Snowbirds must note that because "property" includes securities, Ritchie warns, this tax liability can apply to Canadians who have never stepped into the United States. If you have a client who personally holds shares in U.S. companies, such as Apple Inc. or The Walt Disney Co., his or her executor must file a return if that holding is still in the deceased person's ownership and exceeds a value of $60,000.

This is the second instalment in a two-part series on advising your snowbird clients.

For part one, see: Changes pending for snowbirds