How does one recalibrate their risk management strategy when moving from the U.S. to Canada? This is an interesting financial planning scenario that must be addressed. Insurance is one of the pillars of a successful financial plan and buffers the threat of a catastrophic loss. The most common types of insurance are health, life, disability, long-term care, business and property insurance. It is recommended that one review the various risks and policies prior to a cross-border move to Canada.
Canadian health care is provided and administered at the provincial level for citizens and permanent residents. Expenses are spread throughout the populace and universal coverage is standard. Future residents of Canada should contact the Ministry of Health in their respective provinces in order to obtain specific details regarding their plans. Returning Canadians must also be aware that provinces have varying waiting periods before coverage can begin for eligible individuals. Some waiting periods extend up to three months before coverage is granted. Non-residents as well as individuals subject to waiting periods should review coverage with private insurance companies prior to moving to Canada. A secondary private system does exist on a fee for service basis. This platform includes a significant number of health care facilities, private clinics and diagnostic centers. Importantly, a more comprehensive yearly checkup is available as well as speedier access to specialists when necessary. Your Canadian-based advisor should know how to access these services.
Additionally, life, disability and long-term care insurance all play an important role in the financial security of individuals, families and businesses. These types of insurance vehicles protect estates while providing liquidity during difficult circumstances. However, U.S. based policies and benefits are not necessarily appropriate upon a return to Canada. For example, proceeds from a life insurance policy are treated differently with respect to estate inclusion. Unlike the IRS, the CRA does not add the death benefit to an estate gross-up calculation. A few risk management questions to ask your advisor before moving to Canada are as follows:
• If I purchased a life insurance policy while a resident of the U.S., will the death benefit be appropriate in terms of currency exchange and estate planning requirements?
• If I am a dual citizen, are life insurance proceeds subject to U.S. estate taxes upon a temporary or permanent return to Canada?
• Do I qualify for U.S. Medicare? If so, can I receive the benefits while residing in Canada?
• What happens if I keep a seasonal residence in the U.S. and die while visiting?
• Is the U.S. based policy considered a “tax-exempt” policy for Canadian purposes? How will the status impact income and estate taxation?
Similar questions need to be raised with respect to long-term care and disability policies. Private disability coverage is tied to income, so the circumstances surrounding a move become critical.
It is important to review existing policies and coordinate them with a cross border planning team. Of similar importance, property loss can derail an otherwise sound financial plan and prove catastrophic. The most common property policies pertain to home, auto and businesses. Appropriate policies should be carefully re-established in Canada to ensure benefits are not subjected to currency risk and that the premiums payments are manageable.
There is no “one size fits all” cross-border financial planning strategy. Therefore, it is important to partner with a qualified team of tax, legal and investment professionals who specialize in Canadian and United States cross-border transitioning and asset management. Please contact Cardinal Point Wealth Management at http://www.cardinalpointwealth.com/US/contactus.html to review your unique situation.