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Buying a Property in Florida?

Florida Trust vs. Cross Border Trust. Recent studies have revealed that 25% of all sales in Florida the past year have been to Canadian Buyer’s. With the most favorable exchange rates during our lifetimes, our friends to the North are taking the two fold advantage of both the exchange rate as well as the great opportunity to purchase at such low prices.

 

It is important to know the distinctions between a cross border trust which is heavily promoted throughout Canada and a Florida Land Trust which can be tailored to meet the needs of Canadian Buyers.

 

Both trusts when properly drafted can be effective at avoiding probate, as well as estate taxes at death and still allow individuals to maintain the benefit of only paying 15% capital gain in the U.S. upon profits of sale provided the property is held for 365 days or more.
Under our present tax treaty the amount paid in the U.S. tax paid can be credited against the sums due to Revenue Canada.

 

However, the main difference between the two trusts is the flexibility a Canadian Florida Land Trust provides.

Cross border trusts are irrevocable and cannot be changed. In contrast, Florida Land Trusts are revocable and may be modified at any time. With a Cross Border Trust to avoid estate tax you are basically gambling on which spouse is first to pass away. With a
Florida Land Trust there is no uncertainty as the holder of an enhanced life estate interest that has no value at the date of death and their children or designated successors will not be required to file an Estate Tax Return or probate. The successors simply step into the shoes of the original purchaser for computation of capital gain tax, if any, at a later date.

 

The following is a email written by Attorney Ron Webster in reply to a question from a Canadian Realtor. I am including it because to me it gets to the meat of the matter in rather simple terms.

“Thank you for your note. If you set up a land trust you can avoid both probate as well as any estate tax upon death. Simply your beneficiaries would step into your shoes as far as the basis is concerned and only pay a tax (presently 15%) in the US on the capital gain
which would be credit against the amount owed to Revenue Canada.

It is not advisable to hold the title in a Canadian Trust if you ever plan to use the property
personally…if so this would trigger taxes to Revenue Canada. One land trust could be used
for numerous properties. LLC’s are not the way to go for countless reasons.

The cost to set up a land trust is between $595.00 and $695.00 depending upon the complexity of beneficiaries, etc.

 

Barry Kay
Premiere Plus Realty Co.
Naples, FL

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