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Anthony Layton MBA, CIM

Chairman & CEO, Portfolio Manager

Peter Guay MBA, CFA

Portfolio Manager
Contact
  • T514.875.7566 x 224
  • 1.800.875.7566
  • F514.875.9611
  • Place Alexis Nihon
  • 3400 de Maisonneuve Ouest,
    Suite 1501
  • Montreal, Quebec H3Z 3B8
May-26-17

What you need to know about the long arm of the U.S. Internal Revenue Service

One million or more U.S. citizens live in Canada either as full-time or part-time residents. When they come, Americans usually do so for very positive reasons -- whether it be for love, business or career advancement. Or simply because they were born in the U.S. and returned home with their Canadian parents.

But when Americans come to Canada, they bring a passenger -- the Internal Revenue Service. And this particular guest can cost thousands of dollars and lots of headaches for U.S. citizens living in Canada.

And it’s not just Americans who may be on the hook. Even if you’re a Canadian citizen, you might have to pay U.S. taxes!  

Don’t know they have U.S. citizenship

Believe it or not, many people in Canada are not even aware they’re U.S. citizens. They’re called “accidental Americans.” They have citizenship because they have a parent who is a U.S. citizen, or they were born in the U.S. and soon moved to Canada.

When they find out about their status, they discover what most other Americans living in Canada already know -- they have tax and reporting obligations to the U.S. regardless of where they live in the world.

Those obligations start with a requirement to file a U.S. tax return each year. You must also file what’s known as the Report of Foreign Bank and Financial Accounts, or FBAR, if at any point during the year you has more than US$10,000 in foreign bank accounts.

While you have to pay tax only on income from U.S. sources, filing those documents is a hassle and can cost thousands of dollars if you have to hire professionals to do the work for you. On the other hand, failure to comply leads to some very heavy penalties. So you don’t really have a choice.

Some Canadian tax shelters are recognized

By the way, the U.S. does recognize the tax-sheltered status of RRSPs and registered pension plans owned by U.S. citizens living in Canada. But other Canadian tax-sheltered holdings require additional reporting and are subject to tax, among them registered education savings plans and tax-free savings accounts. If you’re a U.S. citizen living in Canada, these vehicles are not for you.

Now, if you’re a Canadian citizen, you may think this is only of academic interest. But hold on. Uncle Sam might have a way to get into your pockets too. That’s because U.S. assets owned by Canadian citizens may be subject to the U.S. estate tax.

What’s an estate tax? It’s a tax on the transfer of money from a deceased person to his or her heirs. Canada doesn’t have one, but the U.S. does and it applies to U.S. situated assets even if they’re owned by non-citizens.

How to determine whether you owe U.S. estate tax

To determine whether your estate would need to pay the tax, you first have to add up your worldwide estate -- all your assets including RRSPs, life insurance and real estate. If this exceeds US$5.5 million, you may be subject to the estate tax at the time of your death.

Once you meet this threshold, the tax would apply to the portion of your estate that is U.S. assets, including your U.S. stocks, mutual funds, real estate and business assets. Now, there is a tax credit under the Canada-U.S. tax treaty that allows you to reduce your liability.  And if your spouse is still alive, you can transfer your estate to him or her tax free.

But here’s the rub. Even if you don’t owe any taxes, your estate will still probably have to file a special U.S. tax return. That’s because in many cases your estate won’t be able to transfer your U.S. investments to your spouse and other heirs without clearance from the I-R-S.

Some can avoid a huge hassle

It’s another huge hassle and it extends the amount of time and cost it takes to settle an estate. At PWL, we have avoided the problem with some clients who know they are near the end of their lives by selling their U.S. investments.

Another possibility for wealthier clients is to move their investments into a holding company. The company does not die and therefore is not subject to the estate tax. Dealing with Uncle Sam can be expensive, time-consuming and frustrating.

But as I mentioned, the alternative are some very heavy fines. So if you think these situations may apply to you, the best thing you can do is to get advice from experienced professionals.

By: Anthony Layton | 2 comments
May-26-17

Introducing Family Matters with Tony Layton

Your family is the most important thing in your life. You want what’s best for them. That’s why it’s so important to take care of your wealth. It’s what you’ve worked for—it’s the key to your family’s security and the lifestyle you desire.

But how do you protect it? How do you grow it without taking too much risk?

It’s hard to cut through all the confusing advice, competing options and marketing hype in today’s investment industry. I know because I’ve spent more than 35 years helping people prepare and execute the best financial plan for their family’s future. I’ve also worked all my career to improve investor protection in Canada and get conflicts of interest out of the investment industry.

The Family Matters series of videos is all about sharing my experience to help you navigate the investment jungle and make the right decisions for your family now and in the future.

Answering important questions

In the coming weeks, I will answer the most pressing questions you have about your family’s finances and investments in a simple, straight-forward way.

I have over 35 years as a registered portfolio manager. Since 1980, I’ve worked closely with families to first understand their needs and then provide them with the advice, planning and investments that are right for them.

  • I’m the past national chairman of the Canadian Association of Financial Planners and a founding director of the Institut québécois de planification financière.
  • I’m also a founding member of the Global Association of Independent Advisors, an association of firms dedicated to fiduciary excellence.  
  • And I’ve been interviewed many times in the media on improving investor protection and wealth management in Canada.

Twenty years ago, my partners and I founded PWL with the idea that your financial advisor should always have your best interests at heart. It’s a simple principle—and in countries like the United States, Britain and Australia, it’s the law.

Many advisors have conflicts

But we’re not there yet in Canada. Many advisors working for large financial institutions have conflicts of interest. They push their firm’s financial products on you even though those products might not be the best option.

We think you deserve better and that’s why we’ve build our firm on a commitment to fully transparent relationships and no conflicts of interest. I’ll talk more about what this means for you in the weeks to come.

I’ll also talk about why you need a financial plan and an investment policy statement. You wouldn’t set out on a cross-country trip without a map or GPS, would you? You shouldn’t manage your finances without one either.

Finally, we are strong believers in a passive approach to investing. This means we use funds that passively track market indexes instead of trying to actively beat them.

Most active funds underperform

The problem with actively managed funds is that most fail to beat the index. But you pay much higher fees for all that research and sifting of investments. In fact, Canadians pay some of the highest mutual fund fees in the world.

Do you think that makes sense? We don’t either.

We believe you should focus on what you can control: Selecting an optimal asset mix, managing risk and minimizing fees and taxes. At PWL, we take this approach to create portfolios that are grounded in science, not hype.

We also encourage our clients to stay in the markets through good times and bad—to be patient and disciplined and allow their money to grow over time. That’s the way to achieve good performance and reach your financial goals.

By: Anthony Layton | 0 comments
May-23-17

Have You Got a Will?

Welcome back to “Do It Together” financial planning. Today, I’m kicking off my new series by exploring the “why,” “what,” and “how” of having a good will in place.

Why would I begin with one of most people’s least-favorite subjects? Because it’s also one of the most important. You probably already have a general sense that you don’t want to put probate courts, government officials or similar outsiders completely in charge of your loved ones’ financial interests. That’s why it’s so important to document how you want your finances to be handled when you’re not around.

 

But what does it take to get that done? There are a few important things to know. Fortunately, they aren’t quite as complicated as you may fear. In today’s video, I’ll walk you through an overview. Tune in … and sign up for future “Do It Together” shows while you’re there.

By: Peter Guay | 0 comments
May-19-17

Tony's Take: Five rules when buying a cottage

Thinking of becoming a cottager? Here are some points to consider.

1. Location

A place in the country offers an escape from the pace of urban life, but make sure you know what you want in terms of location: lakefront, ski chalet, former farm, or in a village.  And remember to consider privacy and access. What about ease of ownership – do you want minimal upkeep or do you enjoy doing outside chores such as property maintenance?

Takeaway: Be your own devil’s advocate and ask yourself if cottage ownership really is right for you. Sometimes renting is a more practical route.

2. Price

How much do you want to pay? Waterfront on a sought-after larger lake will almost certainly be in the $1-million-plus range, as are homes at ski resorts such as Tremblant or Blue Mountain. A survey last year by realtor Royal LePage showed that recreational property prices and sales in Quebec and Ontario have slightly increased recent years. As well, the low Canadian dollar is attracting American buyers to prime locations, and also prompting some Canadians with Florida properties to cash out and buy back home.

Takeaway: Don’t rush into a purchase. There is value out there, but it takes longer to find it in the country than in the city.

3. Zoning and environment

When considering a particular area or property, find out about zoning restriction, such as setbacks from lakefront or property lines and rights of way. Are there strict environmental regulations? This can be both a plus or a minus, depending on your circumstances. What about local homeowner associations and conservation groups? Is land in the area owned (and thus protected) by the Nature Conservancy of Canada?

Takeaway: Local rules can make a big difference in your long-term enjoyment of a property, so do your homework.

4. Infrastructure and inspection

A key consideration when buying rural land is source of water and septic system. Are utilities (electricity, telephone, internet) close at hand and do they meet your needs? A thorough building inspection is essential, including conformity with bylaws.

Takeaway: If an inspection reveals too many issues, don’t let your emotions drive your decision.

5. Financing and legal

If you need a mortgage, be aware that few lenders will finance a three-season property. Moreover, for a higher-ratio loan, you will need to arrange private mortgage insurance, as CMHC doesn’t insure second homes.

Takeaway: Consider refinancing your city home to fund a cottage purchase.

A cottage typically becomes a family asset, so you should include estate planning in this process. We are experts in this area – please give us a call. We can help.

By: Anthony Layton | 0 comments
May-09-17

Why “Do It Together”?

In my last “Do It Together” video for busy professionals, I introduced the notion that your financial interests may be best served when you achieve good balance between being engaged in your financial planning, without having to handle all the details all by yourself.

If you’ve never been in a “Do It Together” relationship with a financial advisor, you may be wondering what that looks like, how it fits into your lifestyle, and what value it brings to you and your family.

Today, I’ll take a closer look at that. After that, we’ll roll up our sleeves and start exploring some specific “Do It Together” topics. Have you got matters on your mind you’d like to know more about? Send me your own ideas any time.

 

By: Peter Guay | 2 comments