Canadians have been making their presence known in the US real estate market for years. This is due to a combination of historically low financing options, the strength of the Canadian Dollar and because of a correction in the US real estate market. Interestingly, Canadians are the largest purchasers of US real estate outside of Americans. They are buying US properties to snowbird, retire, invest and for cash flow in the case of rental properties. A US real estate purchase is a significant financial and lifestyle choice. Consequently, it is important to consider all financial ramifications prior to purchasing US property. Cross border planning concerns will be unique to the Canadian real estate buyer and proper expertise should always be consulted.
One byproduct of purchasing US real estate is the enhanced complexity precipitated by cross border financial planning. Estate, insurance, financing, residency, immigration and taxation are amongst key issues for consideration. For example, property that is located in the US may be subject to US estate tax and probate rules. Therefore, nonresident and residents of the US should consider effective and efficient disposition strategies for their properties. In similar manner, a tax related concern might prompt a Canadian to purchase an investment property in one state over another. This is due to differing taxation on the state level.
One unique real estate opportunity that is currently available to eligible Canadians is possible through the EB-5 visa program. Please note that other investment opportunities are also offered through the EB-5 visa program other than real estate. The EB-5 visa was created to offer an investment opportunity and a Green Card to foreigners who invest a minimum of $500,000 in support of an approved investment project. Participation within a successful EB-5 visa program can eventually lead to US citizenship.
Affluent Canadians might participate in this program to take advantage of lower US taxation and for the investment merits of the EB-5 project. However, many are simply interested in streamlining the Green Card approval process. Please remember that pitfalls can arise. Notably, a participant in the EB-5 visa program can have a negative return on their investment and is not guaranteed US citizenship. A Canadian considering an EB-5 visa should seek the advice and guidance of an experienced immigration attorney and consult with a qualified advisory team specializing in holistic cross border financial planning.
Likewise, Canadians who are interested in the EB-5 visa program must carefully coordinate their exit strategy. When planning to expatriate, one should understand the Canadian departure tax and take appropriate measures that ensure the Canadian Revenue Agency does not question US residency. Additionally, the merits of the EB-5 investment should be thoughtfully evaluated prior to following through with expatriation. Special consideration must also be given to transitioning investment accounts and coordinating RRSP and other pensions plans following a cross border move.
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.