Cross-Border Planning - TD Wealth, Wealth Advisory Services Donna Walton Wealth Strategist
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Cross-Border Planning TD Wealth, Wealth Advisory Services Donna Walton Wealth Strategist
Agenda ▪ Cross-Border Tax and Estate Planning ▪ Returning to Canada
Cross-Border Tax and Estate Planning
U.S. Residency for Income Tax
You are a U.S. resident The Substantial
The Green Card Test
if you meet either: Presence Test, or
A U.S. resident is subject to U.S. income tax on worldwide income▪ U.S. Annual Information Reporting
▪ Applicable for gifts or bequests of
US $100,000+ from a non-U.S.
individual
▪ Form 3520
Inheritances or ▪ Significant Penalties for Failure to
File
Gifts from
Canada▪ Estate tax applies to worldwide assets of
U.S. citizens and U.S. residents on death
▪ Estate tax is currently 40%
▪ Lifetime Exclusion Amount of US $11.7
million (for 2021, indexed annually)
▪ Subject to sunset in January 1, 2026
▪ If new legislation is not enacted, will
Federal revert to US $5 million (inflation
Estate Tax adjusted)▪ Certain states have an estate or
inheritance tax
▪ Massachusetts has an estate tax
Graduated tax rates going up to 16%
State Estate tax exemption is US $1 million
Estate TaxU.S. Residency for Federal Estate Tax
A U.S. resident for
Residency for Estate Green Card holders are
estate tax is an
Tax differs from Income lawful permanent
individual domiciled in
Tax residents
the U.S.
Internal Revenue Service will look to facts and circumstances▪ If the U.S. is your domicile, estate tax
applies to worldwide estate
▪ Lifetime exclusion amount of US
$11.7 million available
▪ If the U.S. is not your domicile, estate tax
applies only to U.S. situs assets
▪ U.S. situs assets include U.S. real
estate, U.S. securities, debt of a
Estate Tax for U.S. person
Resident Aliens ▪ Unified Credit shelters US $60,000
unless qualify under Treaty
▪ Treaty provides enhanced credit for
Canadian residents
Internal▪ Who are U.S. beneficiaries?
▪ Family who are born in the U.S. (i.e.
U.S. citizens),
▪ Family who are green card holders,
▪ Family who reside in the U.S.
Planning with
U.S. Beneficiaries
Internal▪ If you remain in the U.S.
▪ Planning should be undertaken in
the U.S.
▪ If you return to Canada
▪ Planning undertaken in Canada will
need to include special
considerations for U.S. beneficiaries
Planning with ▪ Cross-border tax and legal advice is
imperative
U.S. Beneficiaries
▪ Need to understand tax implications
on both sides of the border
Internal▪ Wills drafted in Canada
▪ State law governs estate
administration
▪ Consider updating your Wills
▪ Who is the executor of your Will?
Wills, ▪ U.S. resident?
Powers of Attorney, ▪ Out-of-state executor?
and Health ▪ Residency issues for estate/trust?
Directives
Internal▪ Powers of Attorney (POA) and Health
Directives
▪ Recognition of Canadian POAs and
Health Directives under state law
▪ Consider updating while you are in
the U.S.
▪ Special drafting to coordinate
Wills, multiple POAs/Health Directives to
Powers of Attorney, prevent revocation
and Health ▪ Is your Attorney in Canada?
Directives ▪ Practical Considerations
InternalReturning to Canada Internal
▪ Does U.S. Exit Tax Apply?
▪ May apply to long term residents
who meet certain tests
▪ Covered Expatriate deemed to
dispose of all assets before
expatriation
▪ Other Considerations
U.S. Investment
▪ Ability to manage investments
Accounts
▪ Foreign Reporting – T1135
Internal▪ Did you pay the Departure Tax on
leaving Canada?
▪ Election available to "unwind" the
deemed disposition
▪ Election is applied on a property by
property basis
▪ If security was posted for the departure
Unwinding tax, the security is returned
Canadian
Departure Tax
Internal▪ U.S. retirement plans include 401(k)
plans and Individual Retirement
Accounts (IRA)
▪ Options to Consider
▪ Lump sum withdrawal
▪ Transfer 401(k) to an IRA, leave in
U.S.
▪ Convert to a Roth IRA (must be
U.S. Retirement done before return to Canada)
Plans ▪ Leave 401(k) plan, if permitted
▪ Transfer to RRSP
Internal▪ 529 Plans are typically created or
organized as a U.S. trust with a U.S.
institutional trustee
▪ What are the Canadian tax implications?
▪ Canadian nonresident trust rules
▪ Canadian compliance
U.S. 529 Plans
Internal▪ U.S. living trusts or revocable trusts
▪ Popular probate planning
▪ Disregarded for U.S. tax purposes
▪ What are the Canadian implications?
▪ Trust residency
▪ May be deemed Canadian resident
if not factual resident
U.S. Trusts
▪ Canadian compliance may apply
even if income continues to attribute
InternalTeam Approach to Planning – Skills
Needed Business
Cross-Border Succession
Cross-Border
Specialist Advisor/
Specialist Family Facilitator
Business Broker/ Business Business
Cross-Border
M&A Advisor Succession Valuator
Specialist
Advisor/
Business Broker/ Family Facilitator
Commercial M&A Advisor
Banker Your Needs Business ValuatorAccountant
Commercial Banker
Your Your Accountant
Trust & Estates
Needs
Trust & Estates
Professional Lawyer
Professional Your Lawyer
Investment Advisor Insurance
Investment Professional
Insurance
Advisor Professional
InternalQuestions? Internal
THANK YOU
Talk to a TD Wealth representative today
InternalDisclaimer
The information contained herein has been provided by TD Wealth and is for information purposes only. The information has been drawn from
sources believed to be reliable. Graphs and charts are used for illustrative purposes only and do not reflect future values or future performance of
any investment. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should
be evaluated relative to each individual's objectives and risk tolerance.
TD Wealth represents the products and services offered by TD Waterhouse Canada Inc., TD Waterhouse Private Investment Counsel Inc., TD
Wealth Private Banking (offered by The Toronto-Dominion Bank) and TD Wealth Private Trust (offered by The Canada Trust Company).
All trademarks are the property of their respective owners.
® The TD logo and other trade-marks are the property of The Toronto-Dominion Bank.
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