Controlling your assets from the grave



A while back a client came to see me with concerns about leaving the universality of his estate to his spouse in his last will and testament. Having been married once before, he was concerned that upon his death, should he bequeath the universality of his assets outright to his spouse, she may later remarry and bequeath through her own last will and testament, all or a portion of her inheritance to her second husband and possibly her new children, instead of to their children together.


I responded that such a scenario is a possibility as inheritance received by an heir becomes entirely their property with the right to use, enjoy, and dispose at their discretion.  As a solution to his concern, I suggested he bequeath the universality of his estate into a testamentary spousal trust created in his last will and testament, designed to provide for the maintenance and support of his spouse, all the while ensuring that the remaining inheritance be passed on to his children at the time of his spouse’s death. A spousal trust would thereby allow my client to exercise significant control over how his estate would be used, and which heirs would ultimately benefit.


The spousal trust would provide that the surviving spouse would be entitled to receive all the income generated from the inheritance (hereinafter “Capital”) held in the spousal trust during her lifetime. Although no other person other than the spouse can receive, use or have the benefit of the Capital of the spousal trust during the surviving spouse’s lifetime, in consideration of my client’s concerns, I advised him that it was possible to stipulate certain restrictions which would limit his spouse’s ability to encroach or withdraw the Capital, such as either establishing an annual or lifetime limit or specifying criteria for authorized encroachment such as for matters related to health, emergency or educational purposes. Appropriate restrictions placed on capital distributions would assure my client that his children will receive the balance of the capital of the trust.


In addition to ensuring that my client’s wishes and intentions will be respected, a spousal trust also provides benefits that can reduce the income tax that his spouse will pay on the future income earned on her inheritance. Instead of inheriting assets directly and then being personally taxed on the income received from such assets at potentially the highest rates of taxation, a spousal trust would allow such income to be taxed in the hands of the spousal trust at the graduated marginal tax rates that apply to individuals.  As a result of such “income splitting”, a spousal trust can provide up to approximately $11,000.00 of income tax saving per year!


Lastly, by leaving his spouse’s inheritance to a spousal trust, my client would provide creditor protection of the inheritance against claims from his spouse’s present and future creditors, including marital claims from a future divorcing spouse. With creditor protection in place, my client will once again exercise another degree of control over his estate by making sure that it ends up with his spouse and ultimately with his children and not with her creditors.

2010 U.S. Estate Tax Update

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December 20th 2010

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For Friends & Clients

On December 17, 2010, President Obama signed into law major changes to the U.S. federal estate tax. This newsletter is for your review. These changes offer opportunities for new estate planning. We encourage you to read the following and consider reviewing your existing estate plan.

David A. Altro, Managing Partner
B.A., LL.L, J.D, D.D.N, Fin.Pl., TEP
Florida Attorney and Quebec Notary

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Highlights of the new 2010 Tax Relief Act

On December 17, 2010 the U.S. House of Representatives passed the “The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” (“The Tax Relief Act”), which reflects the agreement of congressional leaders and President Obama. This legislation has now been signed into law by the President. Some of the highlights of the Tax Relief Act are summarized below however one key feature of the Tax Relief Act is its duration; the Tax Relief Act only lasts for two years. So all of these changes are fluid and subject to further Congressional debate and future changes.

Read the rest of this entry »

Altro Quarterly Update Winter 2010

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Introducing the Cross Border Video Series

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We frequently receive questions and concerns from clients regarding cross border tax, estate planning, real estate, and immigration.

In response, we have compiled a short video series with real life questions received from listeners of our radio show. Click here to watch as Managing Partner David A. Altro, Florida Attorney & Quebec Notary, provides advice, commentary and guidance in his well-humoured demeanor.

Our most popular episodes include:

You can also watch the videos on our Facebook Page, and share it with your friends.

Join the conversation by leaving questions and comments on our Youtube page for our cross border attorneys!

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Recession, Robo-Signers, and Recalls

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Many Canadians looking to scoop up bargain Real Estate in Florida are finding themselves in a whole lot of hot water, instead of on the sunny beaches of their dreams. In fact many are now asking themselves “if we bought it…don’t we actually own it?” For many the answer, sadly, is no.

We at Altro & Associates, LLP are often asked why an attorney is needed if a title company has been appointed in a U.S. real estate transaction. That same question was also asked by Sonja Kleiman, a paralegal at our firm. The present article will shed some light on why!

A few weeks ago, I was contacted by a buyer we represented in a foreclosure closing in Florida and she was concerned about a recent report aired on CBC’s the National- In Depth & Analysis Report covering the Florida foreclosure fiasco, which raised a red flag for any Canadian who has recently purchased or is thinking of purchasing real estate in Florida.

As real estate attorneys practicing law in the wake of the subprime mortgage crisis, Florida, a favorite getaway and even permanent residence for many Canadians, was hit by a tidal wave of bank foreclosure and repossession cases. Unable to cope with the overload, banks and realtors recruited any and everyone to push through paperwork as quickly as they could, foregoing proper title examinations, forging documents, or simply skipping key signatures, formalities and rubberstamping affidavits without properly verifying authenticity in an attempt to move what was rapidly becoming billions of dollars in stagnant inventory. Read more…

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Altro on the Radio Waves

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Listen to David A. Altro, Florida Attorney, Quebec Notary and Canadian Legal Counsel and host Matt Altro, CFP and Chief Operating Officer of Altro & Associates, most recent episode of "Dollars and Sense" on CJAD AM 800 .The Altros always deliever good humored and spirited discussions on legal issues related to cross border and domestic tax, estate planning and real estate.

The next episodes are scheduled after the new year:

• January 20, 2011
• February 7, 2011
• March 7, 2011

If you missed the recent live shows, you can download them in MP3 format from our website:

October 19, 2010

November 25, 2010

Be sure to check out our expanded Radio Shows page on our website where you can listen to other previous shows, highlighted clips and submit questions to be answered on upcoming shows.

 

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We Can’t All Be the Boss, or Can We?

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George Steinbrenner, the former billionaire owner of the New York Yankees, is widely known as “The Boss”. This is a fitting moniker: Steinbrenner’s hands-on leadership style pushed the Yanks to win 7 World Series victories during his tenure, an accomplishment that undoubtedly made The Boss proud.

As if solidifying his nickname for all eternity, Steinbrenner passed away in July 2010, which, by U.S. tax measures, is a pretty good year to die; due to Bush-era legislation called the Economic Growth and Tax Relief Reconciliation Act of 2001 (the “Act”), U.S. estate tax has been repealed for the duration of 2010. It’s safe to say that Steinbrenner showed the IRS who’s boss – he saved his heirs half a billion dollars by dying before the new year.

The Act increased exemption amounts periodically from its 2001 inception, so that by 2009, the effective exemption from U.S. estate tax was $3,500,000 USD, and by 2010, estate tax was eliminated. The Act’s sunset clause is responsible for the return of U.S. estate tax in 2011, when it will cast a wide net. Read more…

 



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So Patriotism Just Isn’t Your Thing

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Many dual Canadian and U.S. citizens have toyed with the idea of renouncing one of their citizenships in order to remove themselves from a taxation system. As the United States has most recently passed new legislation, we will look at the U.S. taxation issues for U.S. expatriates.

This new legislation entitled The Heroes Earnings Assistance and Relief Act, the “Heart Act” or the “Act,” was signed into law on June 17, 2008 and applies to individuals who relinquish their U.S. citizenship or long term U.S. residency on or after June 17, 2008 and who meet any one of the following: a) have an average annual net income tax liability of more than $139,000 USD for the five (5) years preceding expatriation; b) have a net worth greater than or equal to $2,000,000 USD on the date of departure; or c) have failed to provide certified compliance with U.S. tax obligations for the five (5) years prior to expatriation. Despite the criteria mentioned above, there are however exceptions for certain individuals which would remove them from the implications of the Heart Act.

Read more…

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Cross Border Planning Partners Workshops

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Experienced cross border professionals will conduct workshops in cross-border currency exchange, U.S. immigration after 9/11/01, and estate planning. We will provide you with strategies and information in an attempt to get the best of the Canadian and U.S. tax systems; take advantage of currency exchange rates; receive your Canadian RRSPs tax-free or nearly tax-free in the U.S.; find investments exempt from U.S. income taxes and withholding; and maximize Medicare benefits, just to name a few. General question and answer sessions will also be held to address your specific concerns.

Wednesday, January 26, 2011
The Ritz-Carlton
2401 E. Camelback Rd.
Phoenix, Arizona 85016

Tuesday, February 1, 2011
Rancho Las Palmas Resort & Spa

41-000 Bob Hope Drive
Rancho Mirage (Palm Springs), California 92270

Tuesday, February 8, 2011
The Ritz-Carlton
280 Vanderbilt Beach Road
Naples, Florida 34108

Thursday, February 10, 2011
Boca Raton Resort & Club

501 E. Camino Real
Boca Raton, Florida 33432

To register for the above seminars please call 1-877-839-7111 or email Matt Altro at maltro@cbplanningpartners.com.

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Stay in Touch!

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Radio Show – November 25 2010

Montreal, Quebec – November 25, 2010

November 25, 2010 David and Matt lead off the hour with an in depth look at what to consider when buying a property in the U.S., The conversations progressed when Matt opened the phone lines and listeners called to answer some skill testing questions. Technical questions about U.S. estate tax were addressed with winners receiving a copy of David A. Altro’s book ‘Owning U.S. Property the Canadian Way’. In closing, Matt touched on some of the issues for Canadians interested in moving to the U.S.

Click here for part 1
Click here for part 2
Click here for part 3

Want to check out past shows or other radio content? View our Radio Shows page.

We Can’t All Be the Boss, or Can We?


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George Steinbrenner, the former billionaire owner of the New York Yankees, is widely known as “The Boss”. This is a fitting moniker: Steinbrenner’s hands-on leadership style pushed the Yanks to win 7 World Series victories during his tenure, an accomplishment that undoubtedly made The Boss proud.


As if solidifying his nickname for all eternity, Steinbrenner passed away in July 2010, which, by U.S. tax measures, is a pretty good year to die; due to Bush-era legislation called the Economic Growth and Tax Relief Reconciliation Act of 2001 (the “Act”), U.S. estate tax has been repealed for the duration of 2010.


It’s safe to say that Steinbrenner showed the IRS who’s boss – he saved his heirs half a billion dollars by dying before the new year.


The Act increased exemption amounts periodically from its 2001 inception, so that by 2009, the effective exemption from U.S. estate tax was $3,500,000 USD, and by 2010, estate tax was eliminated.


The Act’s sunset clause is responsible for the return of U.S. estate tax in 2011, when it will cast a wide net.


As of January 1, 2011, the exemption for U.S. estate taxes will be only $1,000,000 USD. Rates will range from 39 per cent to 55 per cent (with a 5 per cent surcharge for estates over $10,000,000 USD and up to approximately $17,000,000 USD).


This means that if a Canadian passes away in 2011 owning U.S. assets worth more than $60,000 and the value of their worldwide estate exceeds $1,000,000 USD, they will be subject to U.S. estate tax on the U.S. assets only.


The scary part is just how easy it is to hit that million dollar mark; virtually everything is included when calculating worldwide estate values for U.S. estate tax purposes, from life insurance to RRSPs.


And even with the plummeting value of U.S. real estate, it’s almost a given that your U.S. assets will be worth more than $60,000 if you own even one U.S. home. When you consider that “U.S. assets” also includes shares of stock in U.S. corporations, it’s pretty clear that, as of 2011, the IRS is the new boss in town.


If you’re a Canadian whose worldwide value is more than $1,000,000 USD and you own U.S. assets worth more than $60,000 USD, but you’re not sure how much U.S. estate tax you would owe in 2011, you can check out our estate tax calculator now, which computes U.S. estate tax liability in seconds.


Despite much talk that the U.S. government would freeze the exemption level at $3,500,000 USD, or at least deal with the issue prior to 2010, Congress has not yet come to the rescue. So far, legislative attempts to prevent the exemption from returning to the low pre-2001 bar of $1,000,000 USD have been unsuccessful.


If Congress doesn’t take action in the next month, the number of U.S. estates affected by the tax in 2011 will be astronomical. According to the Tax Policy Center, 44,200 estates will pay a whopping total of $34.4 billion in U.S. estate tax.


While the number of Canadians subject to U.S. estate tax may not be quite as high, given the rising number of Canadians purchasing U.S. real estate, there are plenty of snowbirds that will be affected in 2011.


Knowledge is power. You don’t have to sit around and drown your sorrows in hot chocolate, shivering in the Canadian cold, waiting for Congress to act. Instead, you can pro-actively design an estate plan that will defer, reduce or eliminate your U.S. estate tax liability.


We use a variety of estate planning tools, ranging from Cross Border Trusts to Non-Recourse Mortgages and gifting strategies. If you or your client has an estate plan that was created in 2008 or earlier, or if you or your client doesn’t have a plan in place at all, I strongly recommend that you seek out the advice of a cross border specialist.


The fact that the 2011 law could change, doesn’t mean that it will. It’s always best to craft an estate plan with the current law in mind. For now, this means preparing for a $1,000,000 USD exemption.


Take charge of your estate plan today. You might not be The Boss, but you can be the boss of your finances if you do what it takes to plan for your family’s future. And that’s something to be proud of.



Many Canadians looking to scoop up bargain Real Estate in Florida are finding themselves in a whole lot of hot water, instead of on the sunny beaches of their dreams. In fact many are now asking themselves “if we bought it…don’t we actually own it?” For many the answer, sadly, is no.


We at Altro & Associates, LLP are often asked why an attorney is needed if a title company has been appointed in a U.S. real estate transaction. That same question was also asked by Sonja Kleiman, a paralegal at our firm. The present article will shed some light on why!


A few weeks ago, I was contacted by a buyer we represented in a foreclosure closing in Florida and she was concerned about a recent report aired on CBC’s the National- In Depth & Analysis Report covering the Florida foreclosure fiasco, which raised a red flag for any Canadian who has recently purchased or is thinking of purchasing real estate in Florida.


As real estate attorneys practicing law in the wake of the subprime mortgage crisis, Florida, a favorite getaway and even permanent residence for many Canadians, was hit by a tidal wave of bank foreclosure and repossession cases. Unable to cope with the overload, banks and realtors recruited any and everyone to push through paperwork as quickly as they could, foregoing proper title examinations, forging documents, or simply skipping key signatures, formalities and rubberstamping affidavits without properly verifying authenticity in an attempt to move what was rapidly becoming billions of dollars in stagnant inventory.


Although the concept of robo-signing was first coined by investor advocate Nye Lavalle in 1999, things came to a head on October 8, 2010. Bank of America, one of the largest mortgage lenders in the US, declared a moratorium on all foreclosure sales and recalled thousands of transactions they suspected had been robo-signed. Cross border real estate purchases being the complex transactions that they are, unless all steps have been completed, the legal title of the property cannot be considered to have been transferred to the new owners.


There is some debate as to whether robo-signers were simply negligent and careless due to the overwhelming case load, or whether they were following orders to move it out at any cost; either way the result is the same. Suddenly your bargain real estate is no longer what you bargained for, tied up in already bottlenecked County Court for years to determine whether or not you own the property you bought and paid for.


Although Bank of America was first out of the gate to put a national moratorium on foreclosures, they were quickly joined by JP Morgan, Wells Fargo, and Citigroup, all recalling tens of thousands of foreclosures suspected of being robo-signed.


Purchasing Real Estate in the US is a complex transaction; if any one part is incomplete the legal title cannot be transferred and the consequences can be disastrous for the purchaser literally losing their homes. In fact your property could be sold out right from under you and you be obliged to turn to litigation.


Canadians vacation or investment home buyers beware the following statistics for foreclosure trends in South Florida:

  • RealtyTrac.com reports 1 in every 155 housing units received a foreclosure filing in October 2010.
  • Florida has the second highest foreclosure rate in the US for August, September and October 2010.
  • Broward, Palm Beach and Miami–Dade Counties, among the most popular with Canadians, account for nearly half of all of Florida Foreclosures.



Canadians and Americans alike are up in arms over the foreclosure scandal whether they bought winter homes or year round retirement property, scrambling to get answers.


Of course with the Canadian dollar hovering at par and favorable interest rates, there are many good investments to be had in the US. A deal is a deal, but beware: a foreclosure sale may be a dud.


If you have recently purchased a home in Florida or are thinking about investing in US real estate make sure you contact a cross border specialist with experience in these and many more complex issues such as Cross Border Estate and Tax planning.