Thursday, January 10, 2013

Financial considerations for snowbirds - Winnipeg Free Press

The Canadian Press - ONLINE EDITION

(Special) - With the Canadian winter now in full swing, so is the exodus of Canadian snowbirds seeking warmth in the southern U.S.

Before heading off this winter for a long stay, there are some things you should do to ensure you take all U.S. tax and real estate issues into account, because failing to adhere to applicable U.S. laws could have some serious implications.

Canadians who spend more than four months in the U.S. every year should file a U.S. tax form each year to avoid being deemed a U.S. resident for tax purposes, advises Prashant Patel, vice-president of RBC Wealth Management. In addition, Canadians who own U.S. real estate should consider if U.S. estate tax or state probate tax will affect them.

Canadian snowbirds also should make sure their affairs are in order well before they plan their trip.

For example, any Power of Attorney should be valid in the U.S. as well as in Canada. As well, if a Canadian personally owns U.S. real estate at the time of their death, their estate could be subject to U.S. estate taxes based on the market value of their U.S. real estate.

"After 2012, the maximum U.S. estate tax rate is scheduled to increase to 55 per cent and the value of a Canadian's worldwide estate need only exceed U.S $1 million to expose them to U.S. estate tax on their U.S. assets," says Patel.

Before heading off, it's a good idea to identify the most convenient ATM locations where you will be able to withdraw funds from your U.S.-based account, and contact your mobile phone service provider to add international roaming to your plan or get a pre-paid phone to be used in the U.S. only.

With the Loonie hovering around parity with the U.S. dollar and with depressed real estate prices south of the border, now might seem like a great time for Canadians to take the plunge and purchase a piece of paradise in the sunny U.S.

Buying real estate in the U.S., however, can be a complicated and risky business. Snowbirds need due diligence, prudence and a little professional help to ensure they don't get snowed buying their winter escape.

As a foreign investor, if you don't have the full down payment for the property, which can be as high as 25 or 30 per cent, you may have to qualify for a mortgage, which can be difficult.

The mortgage lender is likely going to look at your credit history and sometimes will ask for up to six months of mortgage payments up front, or even higher down payments because the only recourse that U.S. banks have would be to that piece of property.

Canadians cannot get a Canadian mortgage for a property in another country. However, if you already own property in Canada with enough equity, you could refinance it here and use the money to buy in Florida.

In the end, the best and maybe cheapest way to finance your purchase might be to borrow the money in Canada and buy the property in Florida outright.

Ownership is a big issue of purchasing a Florida property these days, particularly after the economic meltdown and the spate of foreclosures south of the border.

Property taxes and insurance are two other issues to take into consideration.

Property taxes vary in Florida from county to county, so you need to check them out carefully. And check out your insurance policy for things like hurricane coverage and coverage of your property when you are not there. Some policies will not provide coverage when you are absent, even if you have someone checking on the property. That's why a lot of people tend to buy condos and not stand alone houses.

Financial experts strongly advise that people consult a cross-border tax adviser before they take the plunge and purchase in the U.S.

Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.

Copyright 2013 Talbot Boggs

Source: http://www.winnipegfreepress.com/business/finance/financial-considerations-for-snowbirds-186021442.html

mario williams vcu unlv sam young ncaa bracket ramon sessions portland trail blazers

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.