Cross Border Tax, Estate Planning and Real

Estate Issues for Canadians with U.S. AssetsEstate Issues for Canadians with U.S. Assets

Agenda

• Who we are

• Cross Border Issues for Canadians

– U.S. Estate Tax

– Probate– Probate

– Incapacity

– Protection from Divorce / Creditors

– Capital Gains

– Mortgage Financing

David Altro is the Senior Partner of the law firm David A. Altro & Associates LLP with offices in

Montreal, Toronto, Calgary, Phoenix and Florida. David is an U.S. attorney (member of the Florida

Bar) and a Quebec Legal Counsel and Notary (Chambre des Notaires du Québec). He has been

practicing for over 25 yrs, and specializes in cross-border tax and estate planning, real estate

transactions and domestic and international trusts. David’s call-in radio show on cross border tax,

real estate and estate planning can be heard regularly on CJAD in Montreal. David is a frequent

speaker at tax and estate planning legal conferences, seminars for financial institutions and for

realtor groups.

David A. Altro - BioDavid A. Altro - Bio

� Bachelor of Arts (B.A.) (1976), Political Science, Concordia University

� Licence en Droit (Civil Law) (LL.L.) (1979), Faculty of Law, University of Montreal

� Juris Doctor (J.D.) (1984), Faculty of Law, Nova Southeastern University, Fort

Lauderdale, Florida

� Diplôme en Droit Notarial (DD.N.) (1989), University of Montreal

� Financial Planning Diploma (Fin. Pl.) (1998), Quebec Institute of Financial

Planning

� Former partner of Holland & Knight, Florida

� Member of The Florida Bar, the Chambre des Notaires du Québec, the Institute

of Financial Planners of Québec, the Canadian and the American Bar

Associations

� Mr. Altro has presented numerous speeches, conferences and seminars on U. S.

estate and gift tax planning for Canadians, cross border family and trust

planning, the acquisition and disposition of U.S. real estate properties and has

published numerous articles on such topics

� Mr. Altro is also a Florida and Quebec legal expert on call-in Montreal radio

shows discussing Quebec and Florida law

Who we areSteve Levy, Partner, Quebec Attorney

McGill University Graduate (B.A. in Art History), Law Degree from University of

Montreal (L.L.B.), Member of the Quebec Bar, Shlomi Steve Levy practiced law for

several years in the field of Civil and Commercial Litigation, Corporate and Real

Estate Law. Since joining Altro Law in 2005, Shlomi Steve Levy's practice focuses

on Cross Border Tax and Estate Planning, Cross Border Real Estate Transactions,

Domestic and International Trusts, International Law and Corporate Matters.

Shlomi Steve Levy is a frequent guest on David A. Altro's call in show on Montreal

CJAD and has appeared as a speaker in numerous seminars about Cross Border

Matt Altro, Chief Operating Officer

McGill University graduate (B.Comm. Business Management). Prior to joining

David A. Altro & Associates, Matt was a project manager at Accenture, a world

leader in IT and Management Consulting services. During his 6 years at

Accenture, Matthew developed deep expertise in the areas of Business

Strategy, Process Design, and Client Relationship Management. At David A.

Altro & Associates, Matt is responsible for managing the core business aspects

of the firm. This includes marketing, business strategy, operations and finance.

Matt plays a key role in creating and managing important business

relationships with other professionals.

CJAD and has appeared as a speaker in numerous seminars about Cross Border

Estate Planning and Trusts.

Our Team

David A. Altro, B.A., LL.L, J.D, D.D.N, Fin.Pl., TEP,U.S. Attorney & Canadian Legal Counsel

Senior Partner

Shlomi Steve Levy, B.A., LL.B.Partner, Quebec Attorney

Matt Altro, B.Comm.Chief Operating Officer

Strategic Alliances

Ravinsky Ryan Lemoine LLPMontreal, QC

Garfin Zeidenberg LLPToronto, ON

Our TeamOur Team

Bonnie Altro, B.A., B.C.L., L.L.B.Senior Associate, New York Attorney

Richard Salis, B.A., LL.B., D.D.N. Associate, Quebec Notary

Dan Derhy, LL.B., D.D.N.Associate, Quebec Notary

Amanda Shear, B.A., JD,Member of the New York and Florida Bar

Jason Ansel, B.Comm, LL.LSummer Associate

Shea Nerland Calnan LLPCalgary, AB

Jeffrey Feinberg, P.A.Ft. Lauderdale, FL

- Practice Areas

U.S. Estate Tax – Plan now to Protect your Estate

“My client passed away owning a $1.5M

condo in South Beach in his name personally.

He was worth $10M. Upon his death his estate

paid $438,000 of U.S. estate tax to the IRS.”paid $438,000 of U.S. estate tax to the IRS.”

TAX

US estate tax liability of a non resident will depend on the following 3 questions:

1. Do I have US Assets?Includes US real

estate and US

stocks

U.S. Estate Tax – Am I Liable?

2. Is the value of my US estate > $60,000?

AND

3. Is the value of my worldwide estate > $3.5M?

stocks

Includes insurance

proceeds

U.S Estate Tax Example

Estimate of U.S. Federal Estate Tax

US taxable estate $500,000

worldwide estate $3,000,000

Annual estate increase 0%Annual estate increase 0%

All amounts are in US dollars

Year Estimated

Taxable

Amount

Estate Tax

Marginal

Rate

Estimated

Estate Tax

Amount

Unified

Credit

Amount

Estimated

Estate Tax

Payable

2009 $500,000 37% $155,800 $242,633 $0

Client Scenario

4 M

5 M

6 M

3.5 M

TAX ZONE

3M of

AssetsNO TAX ZONE

1 M

2 M

3 M

3.5 M

Assets:

U.S. Assets: $500,000 Condo in

Florida

Canadian Assets: $2,500,000

Insurance can create tax!

4 M

5 M

6 M

3.5 M 2M UL

TAX ZONE

(up to 45%

tax rate)

3M of

AssetsNO TAX ZONE

1 M

2 M

3 M

3.5 M

Assets:

U.S. Assets: $500,000 Condo in

Florida

Canadian Assets: $2,500,000

Universal Life Policy: $2,000,000

Solution: Transfer Life Insurance into a Trust

4 M

5 M

6 M

3.5 M

TAX ZONE

(up to 45%

tax rate)

I

3M of

AssetsNO TAX ZONE

1 M

2 M

3 M

3.5 M

2M UL

Irrevocable Life

Insurance

Trust “ILIT”

U.S Estate Tax Example

Estimate of U.S. Federal Estate Tax

US taxable estate $500,000

worldwide estate $7,000,000

Annual estate increase 0%

All amounts are in US dollarsAll amounts are in US dollars

Year Estimated

Taxable

Amount

Estate Tax

Marginal

Rate

Estimated

Estate Tax

Amount

Unified

Credit

Amount

Estimated

Estate Tax

Payable

2009 $500,000 37% $155,800 $103,986 $51,814

Estimate of U.S. Federal Estate Tax

US taxable estate $1,500,000

worldwide estate $7,000,000

Annual estate increase 0%

Canada US tax treaty allows for

a credit on capital gains tax in

Canada

U.S Estate Tax

All amounts are in US dollars

Year Estimated

Taxable

Amount

Estate Tax

Marginal

Rate

Estimated

Estate Tax

Amount

Unified

Credit

Amount

Estimated

Estate Tax

Payable

2009 $1,500,000 45% $555,800 $311,957 $243,843

CBT

EliminateCBT

U.S. Estate Tax: Defer, Reduce and/or Eliminate

Insurance

NRM

Split the

value of the

U.S. Asset

between

spouses

Dollar for Dollar reduction

on taxable estate

Use Insurance to Pay for

the Taxes

Defer

Reduce

EliminateCBT

QDOT

Get Spousal

Rollover

A Canadian has the following situation

U.S. Property $1,000,000

Mortgage $600,000

Quiz Time!

Equity $400,000

What is considered to be his U.S. Estate for Tax Purposes?

U.S. Bank Non Recourse Mortgage

• Considerations

– Reduces the U.S. estate tax by the loan amount

– Loan is administered by the bank

– Bank provides client with new money

NRM

– Bank provides client with new money

– LTV – 50%

17

Private Non Recourse Mortgage

• Considerations

– Client has more control

– May eliminate U.S. Estate Tax (100% LTV)

– Liquidity Issues

NRM

– Liquidity Issues

– Guidelines to ensure loan is bona fide

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What is Probate?

Probate is the legal proceedings in Florida to transfer assets from the estate to the beneficiaries.

– Expensive– Expensive

– Time Consuming

– Freezes the estate

Real Life Client Experience - Probate

“My mother passed away owning her Florida condo worth

$500,000 in her name. On top of dealing with our grief over her

loss, I had to deal with a big mess in Florida trying to sell her

condo. Probate fees cost over $15,000. Her Florida estate was

frozen for over a year while my lawyers dealt with the courts.”frozen for over a year while my lawyers dealt with the courts.”

Avoid Probate

• Title of the property in CBT

A Canadian Will does not

avoid Florida probate

• Title of the property in CBT

• Owner maintains control

• No annual filingsCross Border

Trust “CBT”SM

Real Life Client Experience - Incapacity

“My husband and I own a condo in Sarasota. We have been

going down for the winter each year for the last 10 yrs. This year

my husband’s Alzheimers has gotten much worse and he won’t

be able to travel anymore. I decided to sell the house. I found a

buyer but since my husband is on title with me, I couldn’t sell ourbuyer but since my husband is on title with me, I couldn’t sell our

house. I had to hire a Florida lawyer to do a Guardianship

Procedure which was expensive and time consuming.”

Avoid Incapacity

• No Guardianship Procedure

A Canadian POA /

Incapacity Mandate is not

recognized in Florida

• No Guardianship Procedure

• Property is not frozenCross Border

Trust “CBT”SM

Protection Against Divorce

“My dad bought a condo in California 15 yrs ago

for $250,000 which has since doubled. My

father left me the condo when he passed away 5

years ago. My husband and I enjoyed it for a few

years until our marriage went sour. Now we are years until our marriage went sour. Now we are

in the middle of a messy divorce and he is trying

to take me for everything I have, including half

the value of my father’s condo.”

Protect Property from Divorcing Spouse

Assets inherited through the

CBT are safe from divorcing CBT are safe from divorcing

spousesCross Border

Trust “CBT”SM

Protection Against Creditors

“When they passed away, my parents left my brother and I

their beautiful $1M vacation home in Palm Springs, CA. We

both share the property with our families. A few years ago my

brother’s business went under and creditors seized everythingbrother’s business went under and creditors seized everything

he had including our beautiful home in California.”

Protect Property from Creditors

Assets inherited through the

CBT are protected from CBT are protected from

creditorsCross Border

Trust “CBT”SM

Beware of Capital Gain Tax

“I bought my property in 1990 during the recession for $250,000. My

accountant in Saskatoon told me it was best to put the property in my

holdco so I did. Property values soared in Florida over the next 15 years and

I sold it in 2006 for $750,000. The good news is I made of a gain of

$500,000 but the bad news is my capital gains tax of 40% ate up a huge

part of the gain! The worst part of the whole thing is that my accountant

passed away a few years ago so I have nobody to yell at but myself.”

CBT – Lowest Capital Gain Tax Rate

Canadian

Corporation

CBT

IRS 34% 15%

Florida Dept 5.5% 0%

Cross Border

Trust “CBT”SM

Florida Dept

of Revenue

5.5% 0%

Total 39.5% 15%

Canadian

Ltd Partnership

Other Solutions??? “Made in Canada”

Canadian Irrevocable Family Trust

Canadian Corp

21 Yr. Rule

Deemed Disposition

IRS Retained Interest

IRS “Look-Through” Rule

Can’t Get a Mortgage

Shareholder Benefit Rule30

Beware of Capital Gain Tax (cont’d)

“I bought my property in 2000 in Phoenix for $300,000 and it was worth

$650,000 in 2006. I heard David Altro talking about Probate and Incapacity

which got me concerned because I owned it in my name personally. He said

something about putting the property in a trust to avoid these problems so

I went to a local attorney in Phoenix and said he knew exactly what needed

to be done. He set up a revocable trust for me and I was happy…until Ito be done. He set up a revocable trust for me and I was happy…until I

found out that he just triggered a disposition in Canada which meant I had

to pay capital gains tax on the $350,000 even though the property was still

really mine!”

No Disposition if Transferred into CBT

Canadian Tax Advantages of Altro’s Cross Border TrustSM

• Avoids Canadian deemed disposition / capital gains upon initial transfer to trustcapital gains upon initial transfer to trust

• Obtains Canadian tax credit for U.S. capital gains tax paid upon sale

• Preserves Canadian tax credit for U.S. estate tax paid upon death if value increased

Cross Border

Trust “CBT”SM

You Never Know When you May Need a Mortgage!

“I just bought a beautiful home in Lakewood Ranch for $800,000 all cash.

Last year at this time it was worth $1.2M. I went to my attorney in Toronto

and he told me to put it in a limited partnership to avoid taxes. A few

months later I wanted to refinance the home and I went to the U.S. banks

to get a mortgage. They said they wanted my business but couldn’t giveto get a mortgage. They said they wanted my business but couldn’t give

me a mortgage because my home was in a limited partnership!”

CBT – Mortgage Financing

• U.S. Banks will not lend on real estate in the following structures:

– Corporation

– Limited Partnership– Limited Partnership

– Canadian Irrevocable Family Trust

• U.S. Banks has approved our CBT for mortgages

Cross Border

Trust “CBT”SM

Other Key Cross Border Red Flags

• I have children living in the U.S.

• I would like to move to the U.S.

• I would like to obtain a Green Card

• I am a U.S. citizen living in Canada• I am a U.S. citizen living in Canada

Summary

• Cross Border Issues for Canadians

�Probate

�Incapacity

�Protection from Divorce / Creditors�Protection from Divorce / Creditors

�Capital Gains

�Mortgage Financing

�U.S. Estate Tax

Our Process – Courtesy Consultation

1. Analyze 2. Recommend 3. Implement

• First point of contact

• Provide Technical Support

• Manage the Client Experience

• Ensures timelines are set and met

Matt Altro –Relationship Manager

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ALTRO FLASH UPDATE