What Does The American Families Plan Mean For Canadians?
October 1, 2021
Winter is approaching, and for many Canadians, there is hope that they might again be able to escape the Canadian cold and head to the southern United States to enjoy some sun in the depths of winter. In the time that Canadians have largely been unable to travel to the United States the country has experienced a transition in its presidency. Joe Biden, who was elected in 2020 is looking to implement many new laws, some of which may impact Canadians who own property south of the border. Today we want to talk about one of these proposed laws, the American Families Plan.
What is the American Families Plan?
The American Families Plan was announced by Biden in April 2021. The plan has a large intended scope, with intentions to increase government spending in a number of areas, including childcare, paid leave from work, preschool, college, and health care. In order to increase spending in those areas, Biden has announced plans to increase taxation on Americans with a high income. However, as we will see, the plan can have an adverse impact on the balance sheets of Canadians who own property in the United States.
How will the American Families Plan impact Canadians?
As it currently stands, the estates of Canadians may have tax liabilities on their US assets once the property owner dies. This can include money held in American banks, as well as life insurance policies and real estate. However, most Canadians are not impacted by this because there are exemptions for estates worth less than $11.7 million (US dollars). While some Canadians are fortunate to own a winter home in Florida, Arizona, or another warm-weather state, most of them will fail to exceed the exemption amount.
However, the American Famiiles Plan could change this. The website Advisor.ca reported that the exemption on foreign-owned assets would drop to $5 million, explaining that even if a Canadian owns a $500,000 condo in Florida, their estate would be taxed if their worldwide estate value exceeded $5 million. The tax is not insignificant either, with the rate being set at 45% and eventually 65%.
Proper tax planning is essential for Canadians who own use property
This proposed law highlights the need for Canadians to take measures to put an estate plan into place (something everyone should do even if they don’t own foreign property). While the American Families Plan is not yet law, Canadians with US property should not wait until it is too late to start planning.
Accountants and lawyers in both the US and Canada routinely seek assistance from our tax team on complicated cross-border tax compliance issues. We prepare personal tax returns for high net-worth individuals in both Canada and the US. Our expertise in both countries allows us to manage the unique issues presented by owning multiple properties and having multiple revenue sources. As always, our services are confidential and customized to meet your situation. Contact us to learn more about how we can help or call us at (905) 695-1269 or toll-free at (877) 275-4792.