As of November 8, 2021, the U.S. border is open for non-essential travel. That’s great news for the nearly one million snowbirds who had their wings clipped last year due to the COVID-19 pandemic. Chris Gandhu, High Net Worth planner with TD Wealth, joins Kim Parlee to discuss a few things snowbirds need to know before they fly south.
- Chris, always great to see you. Briefly, what are some of the basics you think that snowbirds need to remember as they get ready to go back to the States?
- Hi, Kim, good to be here. Well, Kim, the land border between Canada and the US is finally opening as you said on November 8. And for the snowbirds that's great news. I mean, up until now they have been able to cross the border, but only by flying, and now they'll have additional flexibility to take their vehicle, which, actually, is important for many snowbirds that maybe need their vehicles if they're going to spend a considerable amount of time down South.
Now, as far as the rules for crossing borders, I'm not an expert in this and we all know that everything is in flux and the rules are changing constantly. But I believe you need to be fully vaccinated. And upon your return to Canada, you likely need to produce a negative COVID test. But the best advice I have is make sure you check with the Canada Border Services Agency because everything is subject to change.
- Yeah, I was just going to say-- took the words out my mouth-- check with the CBSA. They know best on that one. Now, I know that one thing that's really important though for snowbirds is the number of days that they spend in the United States. Is that changing? Is it more important this year? Is there different context around it?
- Yeah. I mean, for anybody traveling down South you should be aware of this days test or the Substantial Presence Test. And the reason is because this is sort of domestic US legislation that can deem a foreign national, such as a Canadian snowbird, to actually be treated as a US income tax resident, and that is no fun. If you're a Canadian and get caught, that means you have to file in Canada and file a tax return in the US. You've probably never filed with the US, so that means you're likely retaining a professional to do that. So more fees, more complexity, sometimes that can also lead to double tax, so you generally want to avoid getting caught. So maybe let's understand what this days test or Substantial Presence Test is all about.
To be caught can-- really there's two things. First, you have to spend more than 31 days in the US, and that's likely going to be true for many snowbirds, but then the second part is that you need to spend more than or equal to 183 days or more in the current year plus the past two years. So this is where it gets complicated, because now we are-- it's a weighted mathematical formula here that looks at how much time has that snowbird spent in the US in the current year, 100% of those days are counted.
Then we look at the first prior year, only 1/3 of those days are counted. And we look at the second prior year and only 1/6 of those days are counted. So the current year is impactful, but how much time you've spent in their country in the last two years also matters and could make you go off site.
So you said is this test any more important this year. I guess, colloquially, when I think about some of the snowbirds that did go down South last year, typically they come back in spring, but that's when Canada had perhaps the most strict COVID restrictions and there were quarantine restrictions if you're going to come back into our country. So many of these individuals actually waited it out. They spent a little bit of extra time in the US than they normally would, and because of that, they just need to be cognizant that those extra days are going to impact the Substantial Presence Test and we want to make sure they stay on site and not get off site.
- That's an excellent point and one that I think people's ears should perk up on. OK, what happens if you do get sick and, again, knock on wood as I knock on my head, it doesn't happen, but there still is a pandemic taking place and that is a very real risk for people who are down there.
- Yeah, and like you said-- I mean, hopefully, this is something mild and you recover quickly and you're back at it. But if something serious does happen this does raise an interesting estate planning consideration. Now, most of our viewers would, typically, if they've done their estate planning in Canada are going to have a will and then a Power of Attorney for Property and then a Power of Attorney for Personal Care Decisions.
If you get sick in the US, the issue is that these latter two documents, the POA documents for health care and property, which are typically substitute decision making documents that empower someone else to act for you while you're alive, but aren't able to make decisions. The question really is if you're seriously sick and unable to make, let's say medical decisions for yourself, is your Canadian Power of Attorney document going to be actually valid wherever you are in the US? And the answer to that is probably not. And the reason is that most jurisdictions have their own rules and considerations.
So if you have a vacation property that you do like to spend a few months in every year, a good recommendation is that it's great that you've done your estate planning in Canada, but it's equally important that you get your Power of Attorney, especially for health care, but also for property in that foreign jurisdiction as well.
- I've only got about-- Chris, about a minute. But I do want to touch on this, and just maybe you can tell us at the high level what to think about. But if something major should happen while you're away, and you were alluding to some of the things you need to think about, but US assets might require a separate will. Is that what you're speaking about or is there more to this?
- Yeah. By something major-- I mean, let's just take it to the other extreme. If something happens and you pass away, now you have maybe real estate and other assets in a foreign jurisdiction. That is going to immensely complicate your estate administration. There's no doubt about that. Your executor here has to not only deal with your assets in Canada, but also abroad.
And again, just like with the Power of Attorney documents, the natural question is, hey, should I have two wills if I happen to be a snowbird that maybe has a house in Florida? And unlike the discussion that we just had on the POAs, my answer here is probably not. Your Canadian will is going to suffice as long as you and your executor and family understand that this probably means a bit of delay. The will needs to be probated in Canada first, then it can be resealed in the foreign jurisdiction. So maybe a bit of extra time, a bit of extra money.
However, if you don't want that and you want the expediency, then it's OK to get a second will in that foreign jurisdiction. Just two things, that will should only touch on the foreign assets. The Canadian will should deal with the Canadian assets. And be very careful that the foreign will doesn't invalidate the Canadian will. Most wills start off by saying, I hereby revoke all former wills. You do not want to do that.
- Chris, you're highlighting so many things we need to think about. And we're not even talking about all the things that go wrong if you don't have those things in place. Chris, it's always a pleasure. Thanks so much.
- Thank you.