International Planning Issues on Wealth Transfer

Presenter: Stephen L. Harding, BA Hons., Dip(ITM), TEPDirector, International Solutions- RBC Wealth

Management

Host: Susan Yao-Arkilander, CFP,MBAWealth Advisor, RBC Dominion Securities

April 29, 2011

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Disclaimer

The following information is presented on the understanding that it is for education and information purposes only. Neither RBC nor the presenter has been retained to provide legal, taxation, accounting or other professional advice.

Individuals should consult with their own professional advisors to determine the suitability of the information and examples contained in this presentation before acting upon them.

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Will & Estate

ConsultantFinancialPlanner

Susan Yao-Arkilander

Client

Susan Yao-Arkilander’s Wealth Management

Team

Domestic and International

Trust Services

Tax PlanningSupport

RBC Private Banking

RBC Private Banking

Insurance Specialist

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provide RBC advisors wealth planning expertise targeted planning issues

• income tax, death tax• estate and succession planning• retirement planning• asset preservation• business succession• life insurance• multi-jurisdictional families and assets• immigration and emigration• philanthropic interests

holistic client discovery orientation

Wealth Management Services Team

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Owning Foreign Assets

Inheriting Foreign Assets In Canada

Immigrating to, or Emigrating from Canada

Using Offshore Trusts

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Establish a foreigntrust or corporation and transfer assets to it

Myth:

Avoids taxes in Canada.

Reality:Creates a separate taxpayer

thatis non-resident of Canada

but owned by Canadians

Canadian Residents are taxed on

Worldwide assets

Canadian International Planning

“Myths and Reality”

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Client Issues1. Probate, 2. Estate administration 3. Forced heirship issues in foreign countries4. Death taxes levied by foreign countries

Country A

Country C

Country B

Owning Foreign Assets

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Client Scenarios

Canadian Resident: owns assets in personal name in various countries

each country has its own probate system probate costs vary

• will may not be valid in each country• probate required in each country• probate costs incurred in each country• legal fees in each country• may need resident executor in each country• potential estate administration delays• public process in each country

OR• will not required for each country• probate not required in each country• probate costs avoided in each country• legal fees avoided in each country• will not need resident executor in each country• no estate administration delays• no publicity

Multi-Jurisdictional Probate and Estate Administration

Assets in Own Name Assets Held in Trust

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Client Scenarios

Canadian Resident: dies owning foreign situs assets

foreign country has forced heirship regime

• foreign estate may not pass to intended heirs

• majority of foreign estate passes automatically to specified heirs in specified proportions

• assets pass to intended heirs outside of forced heirship regime (real property is more complicated to plan for)• assets pass to chosen heirs in chosen proportions

OR

Forced Heirship Planning

Assets in Own Name Assets Held in Trust

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Client Scenarios

Canadian Resident: dies owning foreign situs assets

has minimal foreign death tax exemption

• foreign estate worth $2,000,000• $700,000 estate or inheritance tax owing upon death (example)• potentially subject to probate in foreign country and in Canada• potential estate administration costs and delays

• foreign estate worth $2,000,000• zero tax owing upon death • not subject to probate in foreign country or Canada• avoid estate administration costs and delays• consider annual trustee fees i.e., 50 bps

OR

Death Tax Planning

Assets in Own Name Assets Held in Trust / Company

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Client Scenarios

Canadian Resident: receives gift or inheritance of $2M CAD

decides to invest the funds expecting an 5% return is in highest tax bracket

• annual return of $100,000• taxed at 46% (example)• avg. annual tax of $46,000*• potentially subject to probate

in foreign country and in Canada

• potential estate administration costs and delays

• subject to life’s contingencies

• annual return of $100,000• taxed at 0%• annual tax of $0*• not subject to probate in

foreign country or Canada• avoid estate administration

costs and delays• insulated from life’s

contingencies

OR

Inbound Canadian Planning

Assets in Own Name Assets Held in Trust

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Client Scenarios

Non Canadian “Citizen” and Resident: planning to immigrate to Canada

will have excess assets to invest; assume $2M and 5% return will be in highest tax bracket

• annual return of $100,000*• taxed at 46% (example)

• avg. annual tax of $46,000• assumes interest income

• annual return of $100,000• taxed at 0% for first 5 years of

Canadian residence• annual tax of $0 (first 5 yrs)*• assumes interest income• address investment time

horizon and client expectations

OR

Canadian Immigration Planning

Assets in Own Name Assets Held in Trust

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International Borderemigrate

from Country A

immigrateto Country B

createoffshore structure

in Country C

Emigration: Always An Opportunity

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International Border

AN INTERNATIONAL TAX PLANNING OPPORTUNITY

$$$OR

People and Assets Crossing International Borders

“Tax Planning”

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This presentation has been prepared for use by RBC Dominion Securities Inc.*, Royal Mutual Funds Inc., RBC Private Counsel Inc. and RBC DS Financial Services Inc., Member Companies under RBC Investments. The Member Companies, Royal Bank of Canada, Royal Trust Corporation of Canada and The Royal Trust Company are separate corporate entities which are affiliated. In Quebec, financial planning services are provided by Royal Mutual Funds Inc. or RBC DS Financial Services Inc. and each is licensed as a financial services firm in that province. In the rest of Canada, financial planning services are available through RBC Dominion Securities Inc., Royal Mutual Funds Inc. or RBC Private Counsel Inc. Insurance products are only offered through RBC DS Financial Services Inc., RBC DS Financial Services Inc., RBC DS Financial Services Inc., subsidiaries of RBC Dominion Securities. *Member CIPF.

The strategies, advice and technical content in this presentation are provided for the general guidance and benefit of our clients, based on information that we believe to be accurate, but we cannot guarantee its accuracy or completeness. This presentation is not intended as nor does it constitute legal or tax advice. Clients should consult their own lawyer, accountant or other professional advisor when planning to implement a strategy. This will ensure that their own circumstances have been considered properly and that action is taken on the latest available information. Interest rates, market conditions, tax rules, and other investment factors are subject to change.

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