U.S. Estate Tax Planning
Helping to protect your clients
Presented by James Sheldon
CEO and Co-founder
Who is Cardinal Point?
• Independent cross-border wealth management firm
• Provide Canadian and U.S. investment management, crossborder and financial planning services
• Clients consist of high net-worth individuals, families, and entities
• Fee-only firm compensated directly by clients
• Offices in Toronto, Calgary, Vancouver, Newport Beach and Boca
Raton
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Our Team
Key Cardinal Point Personnel
James Sheldon,
CEO and
Investment
Advisor
Owned and operated multiple successful small businesses over 34
years. Financial planner specializing in estate, tax, and investment
planning for high net worth families and business owners both here
and in the US. Co-founder of the CPWM group of companies.
Jeffrey Sheldon,
Principal and
Investment
Advisor
Specializes in assisting Canadian and American families with their
investment and financial planning complexities. Trained with some of
the leading investment academics in the U.S. Co-founder of the
CPWM group of companies.
Dan Walkow,
Portfolio Manager
Registered Portfolio Manager in both Canada and the US with over
30 years experience. Dan manages the portfolios of our Canadian,
U.S. and cross-border clients on a discretionary basis.
Terry Richie,
Director of CrossBorder Wealth
Management
Provides comprehensive Canada – U.S. wealth management
solutions. Terry has been practicing in the areas of financial,
investment, tax and estate planning for over 25 years. He also
provides U.S. and Canadian tax preparation and planning services.
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Cardinal Point’s Cross-Border Planning
• Immigration planning
• Residency planning
• Exit and transition strategies
• Currency planning
• Securities regulations
• Taxation and estate planning
• Investment planning
• Insurance planning
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Advice versus Selling
• Are you an American or a dual citizen?
• Do you or have you ever had a green card?
• Do you own U.S.-based real estate or U.S. stocks with a net value
of over $65,000?
• Do you have a life insurance policy?
• If a U.S. persons, do you hold Canadian mutual funds in a nonretirement account? (PFIC rules)
• Is your world wide estate greater than $5.25M?
If the answer to any of these questions is “yes”, further dialogue is required. For
example, American and dual citizens will always be subject to U.S. yearly
reporting and estate tax rules. Green card holders of 8 years or more may be
considered to be “constrained”.
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Learn your Acronyms
• FBAR - Report of Foreign Bank and Financial accounts form TD F
90-22.1
• FACTA -Foreign Account Tax Compliance Act form 8938
• Form 8891 Return for Beneficiaries of Certain Canadian RRSPs
• Form 3520 and 3520-A Foreign trusts and foreign gift report
• Form 5471 – Information Return of US persons with respect to
certain foreign corporations
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U.S. Estate Tax Calculations
• Canadian residents owning US based capital property (real estate
and stocks) may be subject to US estate taxes.
• Estate tax rules are different from state to state and may not
recognize the Canada – US treaty relief option
• Insurance is part of the gross up of the world wide assets of the
deceased’s estate
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The Calculation (Federal)
• The calculation for a Canadian having a total gross estate of
$6,000,000 with US based property is as follows:
• (US property/Total of World Estate)* Unified Tax Credit for the
year at the time of death
• Our example ($600,000/$6,000,000)*$1,730,800=$173,080
• This will be deducted against the gross estate tax of, in this case
$190,800 leaving a tax of $17,720
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U.S. Federal Estate & Gift Taxes (Unified Transfer Tax Rate
Schedule)
If Taxable Estate
Is Over
But Not Over
$0 $
10,000
10,000
20,000
20,000
40,000
40,000
60,000
60,000
80,000
80,000
100,000
100,000
150,000
150,000
250,000
250,000
500,000
500,000
750,000
750,000
1,000,000
1,000,000
and over
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Tentative Tax Is
Tax is
$0
1,800
3,800
8,200
13,000
18,200
23,800
38,800
70,800
155,800
248,300
345,800
Plus %
18%
20%
22%
24%
26%
28%
30%
32%
34%
37%
39%
40%
Of Excess
Over
$0
10,000
20,000
40,000
60,000
80,000
100,000
150,000
250,000
500,000
750,000
1,000,000
U.S. Unified Credit & Applicable Exclusion Amount
Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Unified
Credit
345,800
555,800
555,800
780,800
780,800
780,800
1,455,800
Tax Repealed
1,730,800
1,772,800
2,045,800
Applicable
Maximum
Exclusion
Tax
Amount
Rate
1,000,000
49%
1,500,000
48%
1,500,000
47%
2,000,000
46%
2,000,000
45%
2,000,000
45%
3,500,000
45%
Tax Repealed Tax Repealed
5,000,000
35%
5,120,000
35%
5,250,000
40%
Each person has a unified credit which will reduce the amount of estate or gift taxes which
must be paid. For 2013, this credit is $2,045,800 equivalent to having $5,250,000 of
assets not subject to federal estate tax. Over the next few years, the unified credit will
increase, as will the equivalent amount of estate assets not subject to the estate tax (the
"applicable exclusion amount").
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Calculation continued
• This may be wiped out by passing the assets to a spouse but will
apply on generational transfer
• The takeaway here is that regardless of whether the client is
subject to this potential problem, you need to make them aware of
the problem
• They will need the advice of a cross-border accountant
• Titling the property properly will go a long way to mitigating this
issue
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In Closing
• U.S. estate tax for Canadian residents is a real and growing
problem
• States do not follow Federal maximums
• Be aware of the 183 and 240 day rules
• Be aware of the probate rules for the states that your clients
Snowbird in
• Seek the guidance of cross-border planning experts prior to
having your clients purchase vacation properties
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The Cardinal Point Group of Companies comprises two legally and separately registered firms organized under the laws of its jurisdiction. Each is owned by its partners,
shareholders, or similar individuals. Each firm enters into client engagements independently.
Cardinal Point Wealth Management, LLC is a U.S.-based, State of California registered investment advisor.
Cardinal Point Wealth Management, Inc. is a Canadian-based fee-only financial consulting firm specializing in financial planning, portfolio analysis, investment management
consulting and on-going financial monitoring. We do not recommend or sell financial products of any kind. We charge our clients an annual fee based on the size of their
portfolio. We collect no fees, commissions, bonuses, gratuities, or any other remuneration, whether financial or otherwise, except what we receive from our clients. We
believe that this is the only way for us to remain completely unbiased. We are free from conflict of interest, and we work solely for our clients.
Copyright © 2013 Cardinal Point Wealth Management, Inc.. All rights reserved.