Transferring to a Green Card Calls for Financial Planning

At Cardinal Point Wealth, we find many situations where former Canadian residents have already been in the United States with an L-1 visa. This sort of visa allows a U.S. employer to transfer a supervisor, executive or someone with “specialized knowledge” from an affiliated Canadian office to one of the company's U.S. offices. To secure this visa, the U.S. employer must be working inside the United States this will let you current method of trading with all the Canadian company or affiliate. Further, the employee have to have worked for the Canadian company for around among the past several years. For former Canadians, the first term with the L-1 visa is two years, therefore it may be renewed for the total of seven years. Unlike many other varieties of U.S. work visas, the L-1 provides the opportunity for a spouse and dependents to function from the United States, via an L-2 visa. Often, after years of employment along with the acceptance with their new U.S. lifestyle, individuals consider pursuing a U.S. Green Card (GC). Unlike other issued U.S. work visas, an L-1 visa holder can put for the GC.

A GC grants “lawful permanent residence status” for your worker and the or her family. The ability to live and are employed in the United States so long as you desire as well as for whomever you want-including yourself-can be compelling. After holding your GC for five years (several years if married with a U.S. citizen), you would be entitled to apply for U.S. citizenship. The United States determines income-tax residency determined by 1 of 3 factors: U.S. citizenship, holding a Green Card, or meeting what is known as the substantial presence test-a calculation of the length of time one is physically within the nation more than a three-year period. Obviously, as soon as you receive your GC you are considered a U.S. income-tax resident, subject to tax on the worldwide income and all the requisite tax compliance requirements. After their fresh of employment from the United States, L-1 holders would certainly are already considered U.S. income-tax residents, at the mercy of the filing of U.S. tax returns and related compliance requirements of foreign accounts. So for the majority of individuals going from an L-1 visa to some GC, their U.S. tax situation remains virtually exactly the same. In unique situations, L-1 holders who filed Form 1040NRs with U.S. treaty elections tie-breaking residency back to Canada may possibly be be subject to U.S. tax on U.S.-sourced income-but this is a subject for the next time. In such cases, receiving a GC could dramatically change an individual’s U.S. tax-filing situation. Should you be living and working from the United States on an L-1 visa, you should consider U.S. gift and estate tax planning needs. U.S. gift and estate-tax residency is often based on the idea of “domicile.” Domicile inside the United States can best be understood to be residing in the country without present intent of leaving. Moving into the United States even briefly could satisfy this requirement, so many think that holding a GC or renewing one’s U.S. work visa will establish domicile. If domiciled in the United States, you'd be be subject to U.S. estate tax in your worldwide estate (including any remaining assets in Canada). That’s as soon as the U.S. estate tax exemption--$5.43 million for 2015 and $5.45 million for 2016. Gift tax would also be levied on lifetime transfers following the application of the annual exclusion of $14,000 for 2015 and 2016. Non-U.S. citizen spouses might be gifted $147,000 ($148,000 for 2016).If you're considering getting a Green Card, you need to get more estate prefer to are the transfer of wealth at death to some non-citizen spouse (through the use of a qualified domestic trust, or QDOT). Assets that may be in Canada might need to be addressed. Should you ultimately turn into a U.S. citizen, then this role of an QDOT, as well as the transfer of assets during life between spouses at night annual exclusion, wouldn't create adverse U.S. gift-tax results. Quite a few clients who pursue a GCchoose to go back to Canada on the part or full-time basis. In such a situation, you should be familiar with the existing U.S. expatriation tax laws that may be imposed when you leave the United States and american residents moving to canada. The expatriation tax provisions under Internal Revenue Code (IRC) sections 877 and 877A connect with U.S. citizens who have renounced their citizenship, and also long-term residents (as defined in IRC 877(e)) who've ended their U.S.-resident status for federal tax purposes. Under these rules, a long-term resident could be understood to be somebody who held a GC in no less than eight of history Many years. Does which means that eight full calendar years? No! Under specific circumstances, you're likely to be considered a long-term resident for less than the eight-year period. Under the rules, you count time of long-term residency by the “moment of time” that you had your GC within a calendar year. So in certain situations, long-term-resident status might really be achieved in six years! Should you did resume Canada and voluntarily abandoned your GC by filing USCIS Form I-407 (Record of Abandonment of Lawful Permanent Resident Status) or had it obtained from by an immigration officer who believed providing that will live in the Unites States, you could see yourself subject to the expatriation tax laws. In this situation you'd be needed to file IRS Form 8854 (Initial and Annual Expatriation Statement), in places you can be forced to complete a worldwide balance sheet and income statement. Further, two kinds of tax, also called together as the “exit tax,” would be imposed on the worldwide assets. You are a mark-to-market tax that could be imposed on the majority of your worldwide assets. You would be deemed to possess discarded these assets at fair rate on the date just before your date of expatriation-or, regarding a long-term resident,about the date prior to the abandonment of your Green Card. After an exemption of $690,000 ($693,000 for 2016), you would be susceptible to capital gains tax on any gains be subject to the mark-to-market calculation from Form 8854. Further, there would be yet another ordinary income tax imposed on any deferred compensation, pension plans, investment, IRAs and also other tax deferred vehicles, including registered assets in Canada. From your financial-, income- and estate-planning perspective, the implications with the U.S. expatriation tax must be strongly considered when the first is considering returning to Canada after having held a GC for a period of serious amounts of being understood to be a long-term resident. The advisors at Cardinal Point Wealth see the unique cross-border planningneed of people who will be considering residing in the United States and time for the Canada with a full- or part-time basis. Our clients’ financial plans are customized to fulfill each client’s specific goals and to assist them to make important decisions with full confidence. www.cardinalpointwealth.com