A temperate climate, universal health care and spectacular scenery make B.C. the destination of choice for retirees from across Canada.
But with the price of real estate, not to mention the cost of living, through the roof, the U.S. is a popular alternative for locals looking to downsize not only their homes but also their expenses. While many so-called snowbirds opt for winter retreats in Florida, Hawaii, Palm Springs or Phoenix, retirement options also exist just outside the city – and country – in Point Roberts, Blaine and Bellingham. So long as they’re resident in Canada for six months, they’ll keep access to health care. Vancouver residents will also avoid the city’s new empty-home tax.
But they’ll also have to deal with Donald Trump, whose election as U.S. president in November 2016 immediately prompted some U.S. residents to look longingly towards Canada.
What right-minded Canuck would see Trump’s America as an alternative to the true north, strong and free?
Any of them, says Matt Altro, president and CEO of MCA Cross Border Advisors, the investment planning division in the Montreal office of law firm Altro LLP, of which he’s a partner.
While there’s been plenty of talk about the threat Trump poses to the cross-border movement of both people and products, precious little has changed. Controls on migration have tightened, in part the culmination of long-term discussions between border agencies in the two countries, but few other initiatives have come to pass. The one that’s closest to becoming a reality, an overhaul of U.S. tax policies, could actually benefit retirees.
“There’s a lot of things they’ve intended to do, but almost nothing has actually moved through Congress and become law. But one of them that has high hopes is the tax reform,” Altro says. “Canadian residents who simply vacation in the U.S. could be exposed to a U.S. estate tax, which is basically a tax at death.… It’s pretty significant and a concern for very high-net-worth Canadians.”
Canadians who own more than $60,000 in U.S. real estate, equities or other assets, and whose estate at death has a value of more than $5.49 million – a number that increases in step with inflation each year – will face a 40 per cent tax on the value of their U.S. holdings.
But in good news for U.S. property owners, Trump wants to eliminate the estate tax altogether.
“He is doubling the exemption and it would go immediately to $11 million per person, and then by 2024 it’s completely eliminated,” Altro says.
Snowbirds who have set up trusts or other structures to mitigate the effects of the estate tax will want to re-evaluate whether or not the structure is still necessary, Altro notes. By eliminating the tax, the new regime could make the U.S. a more hassle-free retirement alternative for wealthy Canadians.
Altro, however, cautions that tax reforms won’t eliminate all the hassles. There’s still the long and costly U.S. probate process, and the risk of incapacity before death.
While some trust structures help owners avoid the probate process, Altro underscores the need for the proper paperwork to ensure that family members and heirs can do what’s necessary in the event of a retiree’s incapacity or death.
“These other issues that have always been there are still important and mean that you should be looking at how to protect yourself,” Altro says.
Another hot-button issue for Trump, immigration, also demands attention from retirees. While the laws haven’t changed, enforcement has stepped up.
“They’re reducing the amount of illegal immigration through extra scrutiny in the process,” Altro says.
U.S. officials who recently met with his firm emphasized that Canadians shouldn’t take crossing the border for granted.
“Just because you come regularly, every time you enter, the border officer is supposed to look at it as a completely new entry,” he says. “They made a point to mention that Canadians should not feel they have an entitlement to enter the U.S.… It’s completely on the discretion of the officer.”
Altro encourages travellers to be ready for extra scrutiny by having what he calls a “border kit” handy – a package that includes documentation of their ties to Canada and intention to leave the U.S.
“Within that border kit they should have their tax returns from Canada, utility bills, if they have a lease they should bring a lease. And also if they are flying, a return ticket is really good to have to show that you are planning to return,” he says. “If you’re scrutinized, these things help.”
Canada and U.S. border agencies now share information, and double-checking what border agents have on file is important (it’s available for review at https://i94.cbp.dhs.gov/I94/#/history-search). Travellers should inform the U.S. Department of Homeland Security of any inaccuracies, just as they would try mending a bad credit report.
“You can see what their system shows in terms of your entries and exists,” Altro says. “Sometimes they don’t have all their information right.”
