Canadian Non-U.S. Citizen or Residents should do their homework prior to buying Real Estate in Washington State.
- Buying real estate in Washington is very different from buying real estate in B.C. and Canada.
- Before your buy realize that once you purchase Washington real estate and become a landowner, you and your estate may be subject to U.S. and Washington taxes. Similar to Canada a future sale of your property may be subject to U.S. capital gains and losses. However, unlike Canada, your estate may be subject to U.S. and Washington Estate Tax upon your passing, which is generally determined by the fair market value of your Washington real estate and other U.S. based assets as well as the fair market value of your Canadian and world-wide assets. Although the U.S. Federal Estate Tax exemption is rather high over 11.6 million U.S. Dollars approximately (until 2026), the Washington Estate Tax exemption is much lower at 2.1 million U.S. Dollars approximately. In other words, if your estate has assets with a fair market value of greater than 2.1 million U.S. Dollars on the date of your passing then there will likely be Washington Estate tax to pay (even if you are a Canadian tax resident). It is recommended you consult with a U.S. Tax Advisor to determine what if any estate tax may be due, and crunch numbers. If the potential estate tax is high you may wish to reconsider buying Washington real estate in the first place.
- Before you buy consider alternatives to hold title of your Washington Real Estate. While Joint Tenancy with Rights of Survivorship is a common way to hold title in Canada it not often recommended in Washington. A Discretionary Spousal Trust based in Canada may be beneficial for a Canadian husband and wife and their estate planning but otherwise a Trust is not a favored entity by the Canada Revenue Agency (CRA) to hold Washington State property. It is recommended you consult with your Canadian Tax Advisor prior to purchasing Washington real estate.
- Canadian husband and wife buyers should be aware that Washington State has Community Property Laws which specify that all property acquired in Washington during marriage belongs to the marital community (50%/50% for each spouse) even if you are a Canadian Citizen and Resident.
- Before you buy consider how to plan for the passing of your Washington real estate. Most of the time it is best to have a your own Washington State estate plan different from your B.C./Canadian Will and Estate Plan.
- Purchase and Sale Agreements (PSA) are normally necessary to sign in order to buy Washington real estate. Washington law has mandatory requirements which must be met to have a valid PSA. The PSA serves as a road map to Closing.
- “Closing” or completion documents are usually prepared by an escrow agent (who is normally affiliated with a Title Insurance Company), and not by an attorney or notary as in B.C./Canada.
- South of the Border, Title Insurance Companies not only prepare the Closing documents but also insure the ”title” (although there are many matters are not covered or excluded). Beware that it is possible for a property owner to lose property rights over time by boundary disputes, improperly located encroachments, adverse claims or prescriptive uses in Washington. So the property legally described in a deed or conveyance may not be property that a buyer will ultimately receive. It is the “Wild West” down here. So there are often risks in any real estate purchase in Washington which are not typical when purchasing property in Canada. In order to reduce the risks, it is recommended that a buyer obtain a survey and perform other due diligence before completing the purchase of Real Estate in Washington and obtain legal counsel.