Nov. 13, 2017
Every year, soon after Halloween is over, Canadians head south in droves, looking to escape the plunging temperatures and the impending snowfalls.
Though snowbirds might spend the winter months lounging on Florida's beaches, exploring the California coast, golfing in Arizona or even ranch hopping in Texas, there's a lot of work they need to do before they can relax in the sun.
There is a mountain of insurance regulations, tax implications and other little-known policies to come to grips with.
The Star consulted experts on how snowbirds can best prepare their finances before taking flight.
Banking and currency
Get a U.S. credit card from a Canadian provider to avoid getting "dinged with interest rates or fees" when using your regular, Canadian card, says Terry Ritchie, the director of cross-border wealth services at Cardinal Point Capital Management Inc.
Ritchie notes that cross-border banking programs such as the ones at TD Canada Trust and RBC offer access to cash without having to worry about the conversion - and they sometimes come with travel insurance and car rental savings.
When exchanging currency, skip banks and use wholesale providers that offer more competitive rates, Ritchie says. He's noticed Knightsbridge Foreign Exchange or Canadian Forex tend to have good deals.
You can also reduce the financial pain of currency fluctuations by saving a little at a time on a regular basis in a U.S.-denominated savings account.
"Your Canadian medical care does not travel with you," says Evan Rachkovsky, the Canadian Snowbird Association (CSA)'s director of research and communications. That means shop around for medical insurance and ask about coverage limits and the currency they're calculated in before travelling.
After a medical emergency, he says, OHIP will reimburse you between $200 and $400 per day depending on your level of hospital care. But Alain Forget, RBC's U.S. head of sales and business development, says American hospital stays for intense conditions can cost around $1,000 a day.
Surgery or additional treatments are even more. "A client from Toronto had a heart attack and stayed for 10 days (in hospital). It cost him about $100,000. Luckily, he was insured," Forget says.
Aside from insurance, Ritchie recommends snowbirds pack a large supply of any medications they need because, while in the U.S., "you can't just run over to Walgreens or CVS to get your prescription filled."
A note from your doctor or pharmacist explaining the drugs and your reason for carrying them will also come in handy, if you come under scrutiny, says Ritchie.
Most don't know it, but buried in the fine print of home insurance policies is often a line requiring that someone monitor your place while you're away.
"If the pipes burst or there's snow damage, it might not be covered, if you didn't have someone watch your home for you," Ritchie warns.
And it's not just your home in Canada to consider. Even though about $50 billion of U.S. real estate is owned by Canadians, Forget says snowbirds often don't know about loopholes with insuring American homes they own.
Several were caught off-guard by Hurricane Irma, which swept through Florida, causing damage and big bills for owners without natural disaster insurance.
Snowbirds should learn from the storm by looking closely at their insurance and considering boosting it, if it lacks provisions for extreme weather, he says.
The U.S. taxes snowbirds who spend more than four months in the country consistently over three years, Ritchie says.
They call it the Substantial Presence Test and the best way to calculate if you'll be taxed is to add the days you spent in the U.S. in your latest year to a third of the number of days you spent there the year before and a sixth of the days you spent there the year before that.
If the total is above 183, then you should be prepared to pay up.
"It applies to most snowbirds, when you run the numbers," Ritchie says.
You'll also be on the hook for U.S. properties you own and will have to file a return on the net income if they're rented out to others. Any taxes you pay in the U.S. have to be noted when you file Canadian taxes - a fact most are unaware of, says Ritchie.
Travel insurance can save you when flights are cancelled or delayed, luggage is lost or your cruise line, airline or other travel operator goes out of business. Insurance can also be handy when an unexpected medical emergency or illness hits.
When searching for travel insurance, you can sometimes save by departing before your birthday because it might land you in a lower price category for travel insurance rates based on age, Rachkovsky says.
Look out for early bird rates - mostly advertised in July and early August - that can also bring savings, he recommends.
If you're driving to the U.S. or using your vehicle during your stint outside the country, you better check your insurance plan, Rachkovsky says.
Some charge a premium or limit how much time your vehicle can be driven outside Canada.
The CSA additionally recommends upping your automobile liability limits to $2,000,000 or more because American claims can be very high.
Phone, internet and cable plans can add up and when you're in another country not using them, be wasteful. CSA suggests asking your provider if you can suspend services or put your services "on vacation" for a flat rate maintenance fee.