How To Hold Title: Options for Canadians Owning US Real Estate
Summary of the pros and cons of each ownership type
There are many ways to hold title to real estate in Arizona. It can be held individually in your name(s) or indirectly as an entity like an LLC, Corporation or Trust.
Below is an overview of the options for Canadians owning property in the U.S. This is provided by Dale A. Walters, CPA, PFS, CFP® the author of Buying Real Estate in the US: The Concise Guide for Canadians
Type of Ownership | Pros | Cons | Conclusion |
♣ Direct Ownership | |||
| Community Property with Rights of Survivorship | Simple, no cost, potential capital gain tax advantage at death | Probate expenses, only available in certain states, no liability protection | Community property with rights of survivorship is typically preferred |
| Community Property with Rights of Survivorship | Simple, no cost, potential capital gain tax advantage at death, no probate expenses | Must pass directly to surviving spouse, only available in certain states, no liability protection | Where direct ownership is desired, preferred where available |
| Joint Tenants | Simple, no cost | No potential capital gain advantage at death, no liability protection | Where direct ownership is desired and community property is not available, typically the preferred choice |
| Tenancy by the entirety | Simple, no cost | No potential capital gain advantage at death, no liability protection | Typically preferred in Florida where direct ownership is desired |
| Tenancy in common | Simple, not cost, can be used with non spouses and multiple owners | No potential capital gain advantage at death, no liability protection | Preferred where direct ownership is desired and a couple is not married according to U.S. law. I would avoid with multiple owners and use a partnership instead. |
Type of Ownership | Pros | Cons | Conclusion |
♦ Indirect Ownership | |||
| Canadian Corporation | Avoids U.S. nonresident estate tax | Higher taxes, costs, complexity | Recommend in only very limited situations |
| Canadian Limited Partnership | Avoids U.S. nonresident estate tax | Costs, complexity | Recommend in only very limited situations |
| Canadian Trust | Avoids U.S. nonresident estate tax | Costs, complexity, 21 year step up | There are better solutions |
| US Limited Liability Company | Asset protection | Costs, complexity, higher taxes | Never use |
| US Corporation | Asset protection | Costs, complexity, higher taxation | Recommend in only very limited situations and in conjunction with a Canadian Corporation. |
| US Revocable Trust | Avoids probate, other potential benefits for next generation | Cost to establish, no asset protection | A Cross-Border TrustSM is best used when 2nd home and the value is at least $750,000. A traditional U.S. revocable living trust is not recommended because there are cheaper ways of avoiding probate. |
| US Limited Liability Partnership | Asset protection, no double taxation | Costs, limited complexity | Where asset protection is desired, preferred method for couples. |
| US Limited Liability Limited Partnership | Asset protection, no double taxation | Costs, limited complexity | Where asset protection is desired, preferred method for those that are not couples. |
This is for informational purposes only. Please be careful about making your decision. We recommend you consult with the appropriate counsel.
Provided by Dale A. Walters, CPA, PFS, CFP® his new book is titled: Buying Real Estate in the US: The Concise Guide for Canadians
You may also contact him for additional information about how to hold title or other legal ramifications to buying and selling real estate by Canadian nationals.
Dale A. Walters, CPA, PFS, CFP® Chief Executive Officer and Chief Compliance Officerwww.keatsconnelly.com3336 N. 32nd Street, Suite 100, Phoenix, AZ 85018-6241Real Estate Services
To discuss purchasing or selling properties in Greater Phoenix contact us.
View the Real Estate Buyer's Guide For Canadians and the inPhoenix Realty Group general Phoenix Home Buyer's Guide.
