Snowbirds are not necessarily wealthy people, and heading to warmer climes every winter has its costs. They plan carefully to manage such costs as travel, travel insurance and maintaining two residences (at least, during the time spent away from Canada). But it is the unexpected costs that can devastate your snowbird clients, and there a number of ways you can help.

“We’ve saved our money and want to enjoy winters in the sun,” says Gerry Brissenden, the 75-year-old president of the Canadian Snowbird Association, a non-profit advocacy organization dedicated to improving the rights of Canadians travelling to destinations such as the U.S. Sunbelt, a favourite of older Canadians. “By avoiding ice and shovelling heavy snow, we are not a drain on the Canadian health-care system.”

Still, unanticipated expenses can hit retired clients who spend extended periods outside Canada. Here is how you can help them avoid some of the pitfalls:

> Insurance. Travelling with adequate health coverage is a must. “If I had a heart attack in Florida, it could cost me US$60,000 and more for emergency health care for five to eight days in hospital,” Brissenden says.

You should remind your snowbird clients to get travel insurance that covers all medical conditions relevant to them. Picking an insurance package that doesn’t cover all conditions may be a savings now, but it can have heavy costs later on.

“People think, ‘I won’t say I have this or that, and my premiums won’t be as high’,” Brissenden says. “But if something happens when that person is away, the insurance company will contact his or her Canadian doctor, who will be obliged to disclose [the patient’s] condition. And [then] the insurer will not pay the bill.

“Don’t be guided by the price of premiums,” adds Brissenden, who divides his time between Orillia, Ont., and St. Petersburg, Fla. “You may save a couple of hundred dollars on a policy, but end up spending thousands on extras that aren’t covered.”

It’s a myth, he says, that older people with medical conditions can’t get travel insurance: “Of course, the older the traveller is, the higher the premium will be.”

> Length Of Stay. Another big issue, says Barry LaValley, a retirement educator and president of the Retirement Lifestyle Centre in Nanaimo, B.C., is knowing how long Canadians can stay in the U.S. without being considered “resident aliens,” and being taxed in the U.S. on their worldwide income.

“It’s not a set number of days each year,” LaValley says, “but a rolling formula called the ‘substantial presence test’.”

This test looks at the number of actual days spent in the U.S. over the past three years. According to the formula, you add the actual days spent in the U.S. in the current year (once you have surpassed the minimum 31 days) to one-third of the actual days spent in the most recent preceding year plus one-sixth of the days spent in the second-most recent preceding year. A resident alien is a person who has been in the U.S. 183 days or more according to that formula.

Those who meet the substantial presence test are taxed the same as U.S. citizens. That is, those who don’t file an annual form with the U.S. Internal Revenue Service stating their residency ties are with Canada. (Form 8840, the “closer connection exception statement for aliens,” can be found on the IRS Web site at www.irs.gov/pub/irs-pdf/f8840.pdf. )

> To Buy Or To Rent. In some U.S. states, snowbirds pay much higher property taxes than their full-time resident neighbours. In Florida, for instance, there is no cap on property taxes for out-of-state people.

“So, a lot of snowbirds are selling their homes,” says Brissenden, who sold his Florida home four years ago and now is renting.

The two-tier system is partly rooted in a “homestead” exemption dating back many years; it gives permanent residents of the state a $25,000 reduction in the assessed value of their principal residence. In addition, the “save our homes” 1995 constitutional amendment caps the annual increase in assessed property values and taxes at 3% or the rate of inflation, whichever is lower, for principal residences of permanent Florida residents.

There are other factors against buying a vacation property in a sun destination. “Retirement should be a flexible time, with all sorts of options,” LaValley says. “And the older you get, the more important being near family becomes — and the more expensive travel insurance is.”

@page_break@He recommends snowbird clients look three to five years out when making such lifestyle decisions rather than 20 years out.

> Currency Fluctuations. When the Canadian dollar drops, the cost of buying food, gas and entertainment in the U.S. rises. Some advisors favour balancing clients’ portfolios proportionately between U.S. and Canadian investments to reflect the amount of time spent in each country. Brissenden’s solution has been to open a U.S. bank account.

“That means I can get a U.S. credit card,” he says. “Using a Canadian credit card in the U.S. means a horrendous cost of exchange.”

The Canadian Snowbird Associa-tion (www.snowbirds.org) has a currency exchange program that allows its members to transfer funds from any Canadian financial institution to any U.S. financial institution at preferred exchange rates.

“The program works by pooling the funds of all participants, giving us bulk purchasing rates. The savings are passed on to members,” Brissenden says.

Annual membership in the association is $20 per household, to a maximum of two people.

> Wills And Advance Directives. Valid Canadian wills are valid for property outside Canada. So, if your snowbird clients and their spouses have valid wills, they don’t need to draw up second wills in another country. They do, however, need to take copies of their wills with them when they leave Canada.

If snowbird clients don’t have up-to-date wills, you should make sure new wills are written — regardless of travel plans. Clients who remarry must remember that a will made prior to their current marriage is no longer valid; if they die without writing a new will, they’ll be considered to have died intestate and their wishes about disposition of the Florida vacation property, for example, will be disregarded.

Unlike wills, however, powers of attorney drawn up in Canada may not be valid in some U.S. states. Florida, for instance, will not recognize a POA drawn up in Canada. Make sure your client and his or her spouse have POAs drawn up in the state in which they are vacationing.

Health-care directives, or living wills, put your clients’ wishes about medical and personal care in writing in the event they become too ill to speak for themselves. Each U.S. state regulates the use of these directives differently, so a client will need directives that are valid in the state in which he or she is vacationing. U.S. state-specific advance directive documents can be downloaded at www.uslivingwill–
registry.com/forms.shtm. IE