Buying/Investing In Florida: "Cross Border Trust vs Florida Land Trust"

Charles Hanes
January 25, 2012


A number of recent studies show that 25% of all sales in Florida during the past couple years have been to Canadian Buyer’s.  With exchange rates floating around 1% above par (US$1.00 / Cdn$1.01),Candians are taking the two fold advantage of both the exchange rate as well as the opportunity to buy at historically low prices. 


The challenge is to decide which is the best methods for Canadians to take title to their property. Putting property in your personal name opens doors to substantial taxes.  It is important to know the distinctions between a cross border trust which is heavily promoted throughout Canada and a Florida Land Trust which can be tailored to meet the needs of Canadian Buyers. 


Both trusts when properly drafted can be effective at avoiding probate, as well as estate taxes at death and still allow individuals to maintain the benefit of only paying 15% capital gain in the U.S. upon profits of sale provided the property is held for a minimum of 365 days.  Under the existing U.S./Canada Tax Treaty the amount paid in the U.S. can be credited against (deducted from) the sums due to Revenue Canada. 


The main difference between the two trusts is the flexibility offered to a Canadian by using a Florida Land Trust. 


One major difference in the two is that Cross Border Trusts are irrevocable and cannot be changed. By contrast, Florida Land Trusts are revocable and can easily be modified at any time. With a Cross Border Trust, in order to avoid estate tax, you are basically gambling on which spouse will pass away first!


With a Florida Land Trust there is no uncertainty as the holder of an enhanced life estate interest that has no value at the date of death, therefore their children or designated successors will not be required to file an Estate Tax Return or probate. 


The successors simply step into the shoes of the original purchaser for computation of any capital gain tax at a later date.  In effect, when you set up a Land Trust you can avoid both probate as well as any estate tax upon death. Your named beneficiaries step into your shoes and only pay a tax (presently 15%) in the US on the capital gain which would be credited against the amount charged by Revenue Canada. 


It is NOT advisable to hold the title in a Canadian Trust if you ever plan to use the property personally...if so this would trigger taxes at Revenue Canada. One Land Trust can be used for numerous properties. Limited Liability Corporations ("LLC's") are not the way to go for a number of reasons. 


The cost to set up a land trust is between $595.00 and $695.00.  This article is not intended as legal or accounting advise and is written by me (a Realtor) based on my own due diligence and research specifically as a bench market of reference for prospective purchasers of properties in Florida.  I strongly recommend that you consult with both your lawyer and accountant and discuss these options prior to setting out on your path to purchase property down here.


Once you've got this in perspective, then Register with me and I'll make sure that the rest of the process goes smoothly for you and your dream of a Florida property does NOT turn out to be a night mare!


I'm Charles Hanes