Building your Financial
Success
With Alain Aube
Financial Rewards
Heading South? Here's how to avoid excess financial baggage
If you're among the more than 450,000
Canadian seniors* who head south each year for an extended warm weather
stay, there are certain important steps you should take to avoid
overheating your finances.
'Home-in' on money management: Your
financial life doesn't go on vacation when you do. There are still bills
to pay and investments to manage. Be sure you make arrangements to deal
with investments that may need to disposed of or reinvested while you're
away. You'll also need to ensure the payment of regular expenses and
quarterly income tax payments (if required) as well as arranging for the
automatic deposit of Registered Retirement Income Fund (RRIF) payments
If you're going to be away from Canada at the end of April, be sure to
make arrangements to file your tax return.
Some of these matters can be taken care
of before you leave; others may have to be handled from a distance -
unless you put them in the hands of a relative or close friend back home
whom you can trust to manage your affairs while you bask in the warm
sun. To do this, you'll need to execute a Power of Attorney (POA) that
designates a person of your choice to make financial decisions while
you're away.
Take a healthy dose of medical coverage
with you. Government health plans vary considerably from province to
province - but with the top provincial plan paying just over $400
Canadian per day for hospital care in the U.S., where surgical
procedures can run as high as $150,000US, you can anticipate that your
government plan won't fully cover all U.S. health care costs. Avoid
having your life savings wiped out by illness or accident - always
purchase additional health insurance before leaving Canada and be sure
you're familiar with the terms of your policy, particularly sections
concerning existing medical conditions, which may not be covered.
Prevent a willpower brownout. Be sure
your will is up-to-date and takes into account cross-border tax
implications. Owning property in a foreign country can complicate estate
issues and if you own US real estate, there may be American federal and
state estate taxes to pay. Your executor should know exactly where to
find your will, and it is a good idea to append to it a listing of your
assets (and liabilities) including property that you own outside Canada.
Consider 'variable' tax implications. The
U.S. uses a complex formula to determine when a visiting foreigner is
subject to their taxation laws - including the average time you were in
the country over the past three years. Spending as little as four months
a year in the US might mean you have to file American tax forms.
It's a good idea to check the Internal
Revenue Service (IRS) web site (www.irs.gov/) to find out if you qualify
to be exempted from filing a U.S. return by filling out The Closer
Connection Exemption Statement (Form 8840), a declaration that you are
considered a resident of Canada.
There are also a host of other details to
consider before you head south - such as obtaining a duplicate ATM card
in case your original goes missing or stops working and, perhaps,
arranging a U.S. dollar chequing account with your Canadian institution
so you can write cheques in the U.S.
Make your trip as financially secure as
it can be by reviewing all your arrangements with your family and
appropriate legal and financial advisors.
* Source: Canadian Snowbird Association
