The Canadian population is becoming increasingly globalized, whether by reason of marriage, property ownership or otherwise. Because of this, Canadian assets are becoming more commonly held in foreign jurisdictions, causing legal complications, especially for estates.
Those dreaming of a tropical escape from the slush and ice of Canadian winters are looking South for a place to thaw out. In particular, current inexpensive housing prices in the United States has made it an attractive place for Canadians to buy real estate. Those in the market for snowbird condominiums or other properties south of the border need to buy what it is they can afford and can make them happy, without their estate plans at the forefront of their mind. However, it's important not to be naïve in these cross-border property purchases, in order to ensure assets pass on in a meaningful way.
It is not enough to focus solely on the tangibles that can be dealt with when making these decisions, the next moves need be examined as well. In the case of a Florida condo, for instance, buyers need to speak to their tax advisers for specific advice as to their current circumstances. Lawyers can give some direction in a broad manner but tax advisers are better versed in specifics of the situation at hand.
When purchasing property in the United States, it is prudent to look into the country's frequently changing tax laws and restrictions. There are often changes to exemption rates and to actual tax rates as well. One aspect is the need to consider what kind of ownership is desired and to make sure it is properly adjusted according to the location of the property. Joint ownership may mean something different in a foreign jurisdiction than it does in Canada. Options in a place like Florida may include joint tenancy, tenancy by the entirety, tenancy in common or single ownership.
Trusts are also becoming more frequently used vehicles within Canada. Canadians should be alert, however, to the complications that can arise when holding American assets in a Canadian trust. Corporately-held assets can also become complicated by jurisdictional issues. Because individual circumstances differ and severe consequences can follow from poor planning, it is important to consult an experienced professional for advice on these matters.
In particular, it is important to talk to a tax expert about estate taxes because federal organizations, such as the NRA and CRA, operate differently and can change dramatically. Recently, the United States has gone through tremendous change in terms of federal and state estate taxes. These changes will have a significant impact on Canadians who hold assets in the U.S.
In considering that new retirement property for the children and grandchildren to enjoy, don't shy away because of tax concerns. The best thing to do is to consult with financial and legal professionals about your specific interests and concerns and then continue on from there. When armed with the information uniquely applicable to your circumstances, your estate planning will be clearer, more concise and reduce issues for yourself and your family.
*Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page.