|Why You Need a Florida Family Trust to Buy There|
By: Jayson Schwarz and Aaron Grinhaus
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As Canadian “Snow Birds”, flock south for the winter, they are encountering the fact that the cost of Florida real estate has drastically declined in recent years, making the idea of owning property in the sunny south increasingly palatable. One of the biggest fears of owning foreign real estate is the question of what happens when I die?
The recently passed Tax Relief Act, in the United States (“US”) has a $5 million indexed exemption and a 35% rate for tax payable. As a result, Canadians who own US real estate held personally will not be subject to U.S. estate tax where their worldwide estate is less than $5 million at death. However, in 2 years the exemption drops back down to $1 million unless there are new tax law changes. For the purposes of this article we will discuss purchases in Florida.
In essence do we need to subject the Executors (Estate Trustees) to dealing with IRS and disclosing the full value of the deceased’s assets and getting into all of the myriad of cross border tax issues that appear the minute we need to deal with the US Authorities? Not if we can avoid it.
Canadians who purchase property in Florida have certain advantages: first, Canada and the US have a tax treaty that prevents Canadians from paying double tax in many circumstances. This will protect Canadians from double taxation in many circumstances, on the sale of the property. Second, for both tax and succession purposes the property can be placed into a carefully constructed Florida family trust.
In order to determine the eligibility of a given purchaser for such a vehicle it is necessary to meet with a legal and/or financial professional (tax accountant) familiar with all of the complex issues that affect the area and in order to make the professionals understand the individual needs of the person or family requiring the advice. This will allow for the careful planning necessary to make these vehicles work and comply with the tax legislation of both the US and Canada. The cost to establish the trust and administer it, is a small price to pay to avoid the extremely expensive time consuming, frightening and complex world of US tax.
Now is a great time to purchase land in Florida – if done properly. Speaking to a law firm such as ours together with the right tax accountant can greatly decrease your potential risks in falling afoul of either the Canadian or US taxation authorities When done properly the Florida family trust will provide peace of mind and security. In other words: use a Florida family trust to shelter you from the cold!
Jayson Schwarz is a Toronto business and real estate lawyer and partner in the law firm Schwarz Law LLP. Aaron Grinhaus is his Associate.