There may not be a snowflake in sight yet, but many Canadian snowbirds are counting the days until they head south for the winter. But before they pack their bags, there may be some issues they should contemplate ahead of time:
– Substantial presence test. This is the length of time a client has spent in the U.S. over the past three years to determine whether he or she will be considered a U.S. resident for tax purposes.
Canadians are allowed to remain in the U.S. for up to 182 days over a three-year period. The U.S. Internal Revenue Service (IRS) uses a complex formula to count those days: if your client has been in the U.S. for 31 days or more in the current calendar year, all those days from the current year are included, plus one-third of the days from the previous year and one-sixth of the days from the year before that. If the total exceeds 183 days, your client may be considered a U.S. tax resident.
Care is required. Warn your clients that the IRS considers a two-hour shopping trip across the border to be a full day. They should also know that visits to the U.S. are tracked electronically by border officials, including exit controls, so it is wise to keep their own, meticulous records. Heather Freed, an independent certified financial planner in Toronto, says snowbirds need to be cautious about overstepping the 182 limit. Overstaying can lead to being denied entry to the U.S., she notes.
– Health coverage. For the most part, snowbirds need to complete a medical questionnaire to qualify for out-of-province coverage from their provincial health plan, with rates based on general health. Freed says people who belong to a group plan should know that for the past couple of years, they also must have qualified as being “medically stable.”
Insurers have the right to request proof of departure and return, and have no obligation to pay a claim if the planned trip exceeds the number of emergency medical days the client purchased, Freed says. But there are exceptions, she points out: “If you have 30 days’ coverage and there’s a snowstorm on Day 30 and the airline cancels your flight, the insurance company will cover you until you can get back to Canada.”
When your client buys travel insurance, most insurers will provide a wallet-sized card for the client to keep in case he or she needs to use the insurance. Clients should tell someone whom they trust who also is on the trip where that information is kept.
– Banking. Some Canadian banks, including Toronto-Dominion Bank and Royal Bank of Canada, may advise their snowbird clients to open an account in the U.S. with the bank’s U.S. affiliate (i.e., TD Bank and RBC Bank) to make payments easier. These U.S.-based banks offer personal chequing and savings accounts, among other services. These U.S. accounts enable your clients to save money, avoiding on the foreign transaction fees Canadian banks charge when using a U.S. bank’s ATM to withdraw cash and make debit transactions.
– Backups. Suggest to your snowbird clients that they arrange access to their home by a family member or neighbour in case those clients need to get any information while they’re away. Also suggest to your clients to make a photocopy of important documents, such as their passport, insurance coverage and birth certificate.
– Suspend services. Clients also should be reminded to contact Canada Post to have their mail rerouted, to cancel newspaper delivery temporarily and even to see if they can have their home phone service suspended while they’re away.
– Home insurance. Clients should review their home insurance policy to determine how long their home can remain unoccupied and still be covered. Have clients ask a trusted friend to check the house. If no one checks a client’s house and something goes awry, that client may not be covered and have to pay for the costly cleanup and repairs themselves.
– Car insurance. According to the Canadian Snowbird Association, clients who drive their cars in the U.S. may be advised to increase their liability limit to a minimum of $2 million. If your client has an accident in the U.S., any claim for damages occurring in the U.S. will be made in U.S. dollars, while your client’s insurance will pay out in Canadian dollars up to the limit on the policy.
Some insurance brokers want their clients to provide a formal notice when they’re leaving and returning, and may require a supplementary premium for the added risk of operating their vehicle in a foreign country, especially if the clients are going to be away for more than 30 days.
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