Moving to a Green Card Calls for Financial Planning

1. Canadians Working in America on L-1Visa: Moving to a Green Card Calls for Financial Planning Cardinal Point Wealth Management and  Cardinal Point Capital Management

2. Moving to a Green Card Calls for  Financial Planning At Cardinal Point Wealth, we come across many situations where former Canadian residents have been working in the United States on an L-1 visa. This type of visa allows a U.S. employer to transfer a manager, executive or someone with “specialized knowledge” from an af?liated Canadian of?ce to one of its U.S. of?ces. Application for immigrant visa To secure this visa, the U.S. employer must be doing business in the United States and have a current business relationship with the Canadian company or af?liate. Further, the employee must have worked for the Canadian company for at least one of the past three years. For former Canadians, the initial term of the L-1 visa is two years, and it can be renewed for a total of seven years. Unlike many other types of U.S. work visas, the L-1 provides the opportunity for a spouse and dependents to work in the United States, through an L-2 visa. Often, after years of employment and the acceptance of their new U.S. lifestyle, individuals consider pursuing a U.S. Green Card (GC). Unlike other issued U.S. work visas, an L-1 visa holder can apply for a GC. A GC grants “lawful permanent residence status” for the worker and his or her family. The ability to live and work in the United States for as long as you want and for whomever you want—including yourself—can be compelling. After holding your GC for ?ve years (three years if married to a U.S. citizen), you would be entitled to apply for U.S. citizenship. Cardinal Point Wealth Management and Cardinal Point Capital Management

3. Moving to a Green Card Calls for        Financial Planning The United States determines income-tax residency based on one of three factors: U.S. citizenship, holding a Green Card, or meeting what is called the substantial presence test—a calculation of the number of days one is physically present in the country over a three-year period. Obviously, once you receive your GC you are considered a U.S. income-tax resident, subject to tax on your worldwide income and all the requisite tax compliance requirements. After their ?rst year of employment in the United States, L-1 holders would generally have been considered U.S. income-tax residents, subject to the ?ling of U.S. tax returns and related compliance requirements of foreign accounts. So for the vast majority of individuals going from an L-1 visa to a GC, their U.S. tax situation remains virtually the same. In unique situations, L-1 holders who ?led Form 1040NRs with U.S. treaty elections tie-breaking residency back to Canada may only be subject to U.S. tax on U.S.-sourced income—but that is a subject for another time. In this case, obtaining a GC could dramatically change an individual’s U.S. tax-?ling situation. If you are living and working in the United States on an L-1 visa, you should consider U.S. gift and estate tax planning needs. U.S. gift and estate-tax residency is often based on the concept of “domicile.” Domicile in the United States can best be de?ned as living in the country with no present intent of leaving. Living in the United States even brie?y can often satisfy this requirement, so many believe that holding a GC or renewing one’s U.S. work visa is enough to establish domicile. Cardinal Point Wealth Management and Cardinal Point Capital Management

4. Moving to a Green Card Calls for  Financial Planning If domiciled in the United States, you would be subject to U.S. estate tax on your worldwide estate (including any remaining assets in Canada). That’s after the U.S. estate tax exemption–$5.43 million for 2015 and $5.45 million for 2016. Gift tax would also be levied on lifetime transfers after the application of the annual exclusion of $14,000 for 2015 and 2016. Non- U.S. citizen spouses could be gifted $147,000 ($148,000 for 2016). So if you are considering obtaining a Green Card, you should update your estate plan to include the transfer of wealth at death to a non-citizen spouse (through the use of a quali?ed domestic trust, or QDOT). Assets that might remain in Canada would need to be addressed. If you ultimately become a U.S. citizen, then the role of a QDOT, and the transfer of assets during life between spouses beyond the annual exclusion, would not create adverse U.S. gift-tax results. Many of our clients who pursue a GC choose to return to Canada on a part or full-time basis. In such a situation, it is important to be aware of the current U.S. expatriation tax laws that could be imposed when you leave the United States and return to Canada.  The expatriation tax provisions under Internal Revenue Code (IRC) sections 877 and 877A apply to U.S. citizens who have renounced their citizenship, as well as long-term residents (as de?ned in IRC 877(e)) who have ended their U.S.- resident status for federal tax purposes.  Cardinal Point Wealth Management and Cardinal Point Capital Management

5. Moving to a Green Card Calls for  Financial Planning Under these rules, a long-term resident would be de?ned as someone who held a GC in at least eight of the past 15 years. So does that mean eight full calendar years? No! Under speci?c circumstances, you could be considered a long-term resident for less than the eight-year period. Under the rules, you count the years of long-term residency by the “moment of time” that you had your GC during a calendar year. So in some situations, long-term-resident status could actually be achieved in six years! If you did return to Canada and voluntarily abandoned your GC by ?ling USCIS Form I-407 (Record of Abandonment of Lawful Permanent Resident Status) or had it taken from by an immigration of?cer who believed you no longer intended to reside in the Unites States, you could ?nd yourself subject to the expatriation tax laws. In such a case you would be required to ?le IRS Form 8854 (Initial and Annual Expatriation Statement), where you would be required to complete a worldwide balance sheet and income statement. Further, two types of income tax, often referred to together as the “exit tax,” would be imposed on your worldwide assets. The ?rst is a mark-to-market tax that would be imposed on the majority of your worldwide assets.  You would be deemed to have disposed of these assets at fair market value on the date prior to your date of expatriation— or, in the case of a long-term resident, on the date prior to the abandonment of your Green Card. After an exemption of $690,000 ($693,000 for 2016), you would be subject to capital gains tax on any gains subject to the mark-to-market calculation from Form 8854.  Cardinal Point Wealth Management and Cardinal Point Capital Management

6. Moving to a Green Card Calls for  Financial Planning Further, there would be an additional ordinary income tax imposed on any deferred compensation, pension plans, stock options, IRAs and other tax deferred vehicles, including registered assets in Canada.  From a ?nancial-, income- and estate-planning perspective, the implications of the U.S. expatriation tax need to be strongly considered when one is considering returning to Canada after having held a GC for a period of time and being de?ned as a long-term resident. The advisors at Cardinal Point Wealth understand the unique cross-border planning need of individuals who are considering living in the United States and returning to the Canada on a full- or part-time basis. Our clients’ ?nancial plans are customized to meet each client’s speci?c goals and to help them make important decisions with con?dence. Need Help Managing Your  Cross-Border Lifestyle?  Whether you are transitioning residency between Canada and the U.S. or you have already made the move but continue to hold investment assets or ?nancial interests in both countries, a cross-border ?nancial plan will assist in reducing taxes and maximizing your estate. Receive further insight with our free white paper, "Manage your Canadian and U.S. Cross-Border Lifestyle." Click to download below. Download Now Cardinal Point Wealth Management and Cardinal Point Capital Management LegalandCompliance

7. Copyright © 2018. Cardinal Point Wealth Management, LLC and Cardinal Point Capital Management Inc. All Rights Reserved. "Cardinal Point" is the brand under which the dedicated professionals within the independent Cardinal Point Group of Companies collaborate to provide ?nancial and investment advisory, risk management, ?nancial planning and tax services to selected clients. Cardinal Point comprises two legally separate companies: Cardinal Point Wealth Management, LLC, a U.S. registered investment advisor and Cardinal Point Capital Management Inc., a U.S. registered investment advisor and a registered portfolio manager in Canada. Advisory services are only offered to clients or prospective clients where the independent Cardinal Point ?rms and its representatives are properly licensed or exempt from licensure. Each ?rm enters into client engagements independently. This brochure is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Tags: cross border ?nancial advisor, cross border tax planning, cross border ?nancial planning, cross border wealth management Cardinal Point Wealth Management and Cardinal Point Capital Management