Anyone claiming the election of Donald Trump as the next president will push them to relocate to Canada, or anywhere outside the U.S., probably doesn't appreciate the financial implications of such a move.
Every four years some U.S. citizens and celebrities threaten to renounce their citizenship and emigrate to anywhere-other-than-America if their candidate fails to become president. Most are just blowing off steam and they stay put.
During this especially polarizing election cycle,
it's been stars Miley Cyrus, Cher, Amy Schumer, Chelsea Handler, Jon Stewart and a few others kicking up the most dust about moving out. But they're not alone.
On Tuesday night as the probability that Mr. Trump would beat Democrat Hilary Clinton ratcheted up, emotional pledges to flee U.S. borders flourished on social media. So many people began searching how to emigrate to the nation's northern neighbor that
Canada's immigration website was overwhelmed by traffic and shut down temporarily.
“The reality is that most don't understand all the issues, both financial and non-financial things, that they'll have to work through,” said financial planner Robert Keats, president of Keats Connelly and Associates.
First off, everyone has to live somewhere.
If one gives up their U.S. citizenship, they need to be allowed to live somewhere else, he said. All countries have their own rules, restrictions and limits on who can emigrate within their borders.
Financially, the tax burden “can be horrendous,” Mr. Keats said. Cross-border financial planning can help trim the bill if the clients allows enough time to prepare, he said.
"If you go charging across the border, you're going to get whacked by taxes," Mr. Keats said.
The U.S. levies an exit tax that's aimed at discourage citizens from giving up their citizenship for financial reasons. The tax, similar to the amount of an estate tax, is based on the value of the citizen's global estate when they renounce citizenship.
(More: Social security benefits for noncitizens)
Additionally, any money that someone who gives up their citizenship later leaves to a U.S. citizen automatically becomes eligible for inheritance tax of 40%. Also, if they visit the United States and spend more than 31 days in the country in a given year, they will be taxed as a U.S. citizen for the whole year.
“It's hard to legally emigrate,” said Nuri Katz, president of Apex Capital Partners, an international financial advisory firm. “It's a lot more complicated than just piling your stuff in a U-Haul van and crossing the border.”
It also takes time, like one to three years, and the individual must meet certain criteria specific to that country, often something like having a job offer, he said. For Canada, specifically, becoming one of the 250,000 or so people it accepts each year is a highly competitive venture.
“Everyone today is in a panic that Trump won, but they all still have to compete for one of those spots,” Mr. Katz said. “Canada isn't going to increase its intake of immigrants just because Trump won.”
Tax experts said there's been an increase in U.S. citizens moving overseas in recent years as the government has ramped up efforts to require tax-reporting on foreign accounts.
A record 4,279
U.S. citizens renounced their citizenship and moved overseas last year, a 20% increase over 2014, according to the Internal Revenue Service.
