Does gift tax affect me? I am a dual citizen of Canada and the U.S., residing in Canada.

The annual gift tax exclusion amount is $15,000 (US) for 2019. This means as long as you remain under the $15,000, you can give to as many people as you like in that year, but the total gift to each individual needs to be under $15,000. The next year as long as the exclusion amount is the same, you can give another $15,000 to the same person or to whomever you choose. Transfers that are exempt from tax (i.e., where you can give more than $15,000) are for medical expenses or tuition. To qualify, the the funds must go directly to the hospital or university, not to the individual.

The benefits of doing lifetime gifts are:

• Annual exclusion of $15,000
• Medical and tuition payments have no gift tax
• Removes appreciation from future transfer tax
• Moves taxable income generated by asset from high-bracket donor to lower bracket donee (?)
• No actual tax payment unless cumulative taxable gifts exceed the gift tax applicable amount

This is an opportunity for individuals to review their current planning strategies to determine continued suitability, particularly if those plans now seem overly complex. US citizens may, for example, choose to reduce worldwide assets by gifting assets to children, grandchildren and/or a trust, forgive a family member’s debt (among other things) to utilize the increased exemption. Unfortunately, gifting is unlikely to increase the cost base of the asset, which commonly occurs when the asset transfers at death.

US spouses can commonly utilize the unlimited marital deduction, which effectively permits a tax deferred, spousal rollover upon the death of the first spouse. However, a deceased spouse’s remaining estate and gift tax exemption amount will not automatically transfer to the surviving spouse. In order to transfer, the survivor must make an election on the estate return even if there is no tax due. The transfer between spouses is referred to as “portability” and may be helpful in minimizing the risk of an unexpected tax bill upon the death of the survivor, depending on the value of worldwide assets at that time.

For highly affluent US citizen spouses or for a mixed Canadian/US marriage, wills that incorporate a spousal trust/QDOT trust are a common planning technique to reduce the risk of estate tax.

Consult with a team experienced in cross border matters for estate planning advice concerning taxation, investments and legal matters.Tiffany and John, the founders of SWAN, are experienced advisors who are registered in both Canada and the United States. We understand the challenges that the cross-border American citizen faces and have strong connections with other cross-border professionals in areas like tax, trust and estate planning, insurance and immigration.

By being registered in both countries and well connected to other cross-border centers of influence, we can offer you more than just a Canadian wealth management solution. We can offer you a holistic wealth management solution and coordinate your entire portfolio of assets to keep you on track to achieving your financial goals.

Raymond James advisors are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. Raymond James (USA) Ltd., member FINRA/SIPC. Raymond James (USA) Ltd. advisors may only transact business with residents of the states and/or jurisdictions for which they are properly registered