Relaxing on a sun lounger sure beats digging your car out from under a mound of snow. But there are some things that Canadian snowbirds should consider when preparing for an extended winter stay south of the border.
Tax and financial planning expert Tannis Dawson, who works for Investors Group in Winnipeg, has seen clients run into all kinds of tax and financial troubles. She provided us with these five financial tips for Canadians travelling to, buying real estate or wintering in the United States.
1 Update your will and power of attorney Not only is it critical to have a will, it's essential to keep it up to date. If you own a U.S. property, get a U.S. lawyer to check your will in order to avoid costly delays in transferring ownership. Many people choose to create a power of attorney (or mandate in Quebec) to handle some or all of their personal financial affairs while they're away or in the event that they become incapacitated. "This will make it easier for family members in case of an emergency," Ms. Dawson says.
2 Be pro-active about tax planning If you spend a lot of time in the United States each year - more than 122 days, or 4 months, on average - the Internal Revenue Service (IRS) may consider you a U.S. resident. (Another more complicated three-year calculation was laid out in this Tim Cestnick column last week.) To avoid filing a U.S. tax return, you need to submit IRS Form 8840, a closer connection exemption statement that says you are considered a resident of Canada. Also, make sure you are back - or take steps - to file your Canadian taxes before the April 30th deadline.
3 Get your financial house in order Set up pre-authorized payments for bills, arrange Internet banking and suspend newspaper and cable service. Make sure that your credit cards, debit cards, driver's licence, house and vehicle insurance do not expire while you are gone. Let the credit card company know you are leaving. "Getting a U.S.-dollar denominated account is a first priority" for most snowbirds, says Dale Walters, the chief executive officer of Keats, Connelly and Associates LLC in Phoenix. He suggests opening a U.S.-dollar denominated bank account south of the border, which will make it easier to write cheques while in the States.
4 Get health insurance An uninsured stay in a hospital outside Canada could jeopardize your financial well-being. "The average cost of a medical incident outside of Canada is $26,000," Ms. Dawson says. "If people don't budget for this, it could really eat into their retirement assets." Check with your Canadian insurance provider to see whether tweaking departure or arrival dates could result in a lower price, and try to capitalize on early-bird offers. Mr. Walters says that despite fears of it being prohibitively expensive, a six-month policy can cost you less than $1,000 (U.S.).
5 Organize your investments before you go Make arrangements to ensure your assets don't go into limbo while you're away. This might include leaving instructions for the re-investment of any Guaranteed Investment Certificates (GICs) that will be coming due, or arranging for payments out of your Registered Retirement Income Fund (RRIF).
"If your investments come due, you have to give trading instructions and that should be done while in Canada," Ms. Dawson says.