The Allure of Cross-Border Financial Planning

contributed by Nathan Gehring

Old BorderMy return to KeatsConnelly has surprised me. Even though I had spent nearly two years working here previously, I had forgotten just how different cross-border financial planning can be compared to conventional financial planning. There’s something uniquely interesting about this financial planning niche.

Over the next few months, I plan to blog about some of these differences and specific expertise needed to work in this unique field. For today, I thought I’d share a few of the very high level ways that cross-border planning differs from conventional planning.

Taxes, Taxes, Taxes

Practicing financial planning in the context of a single tax code can be tricky. The U.S. tax code is now approximately 70,000 pages long and can often be complicated to navigate. In cross-border planning this complexity is magnified exponentially. At KeatsConnelly, not only do I need to understand the U.S. tax code to help clients make good financial decisions, but I also need to have an understanding of the Canadian tax code.

And if working with two tax codes wasn’t enough, a third tax element is introduced in cross-border planning: international tax treaties. For example, at KeatsConnelly we focus on clients who have ties to Canada and the United States. The United States and Canada have a tax treaty in place, the Fifth Protocol to the Canada — US Income Tax Convention (Treaty). This treaty lays out sets of rules controlling the taxation of individuals who are subject to both Canadian and US tax law. So, not only do I need to understand the tax codes of two countries, but also the treaty and interaction of those two taxes codes! It’s complicated, it’s grey and it’s a heck of an interesting area to practice in.

Speaking of Taxes

Tax planning from a conventional financial planning sense is pretty straight forward…generally, be as tax efficient as possible over the long term. In the context of cross-border planning, this can sometimes be different. Sure we want to offer our clients suggestions to be tax efficient, but sometimes we actually advise them to generate additional taxes.

For example, take a client who has not yet earned enough credits to qualify for Medicare in the United States, but who will be living here for a large portion of the year. We might advise them to seek out opportunities to create wage or self-employment income for a few years which is exposed to FICA or self-employment taxes in order to earn more Medicare credits. In this case, we are asking our clients to consider paying MORE taxes, with the goal of obtaining a benefit that is in their best interest in the long term.

 Oh, Yeah…Immigration!

Lest you think cross-border planning is all about complicated, intertwined tax systems, let’s not forget about immigration. Conventional planning rarely (if ever) deals with immigration issues. A conventional financial planning client wants to travel? They grab their passport and go travel. A cross-border planning client wants to travel? Suddenly, a whole host of issues need to be considered. How many days will that client have stayed in one country or another? Will this travel impact their immigration status or tax residency? Will they be allowed to return? And the immigration issues go far beyond just travel consideration.

Lots of Intrigue

There are tons of intriguing differences between conventional financial planning and cross-border planning. Two tax regimes, one tax treaty, immigration issues, different social programs and lots of grey areas make for very compelling work. The items I’ve written about today only scratch the surface. As I continue to immerse myself back into this world, I’ll share interesting differences on this blog.

In the end and despite the differences, practicing conventional or cross-border financial planning does have the same goal: to help clients make good financial decisions and to serve those clients in a manner that is in their best interest.

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Posted in Cross-Border Blog
Cross-Border Series
The Border Guide
Now available in its 11th edition, The Border Guide has sold over 80,000 copies and is considered the definitive cross-border financial tool for Canadians living, working and investing in the United States.
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