As an American living in Canada, your financial and wealth planning challenges are far more complex than those faced by non-U.S. citizens that are residents of Canada.
In fact, you may be asking yourself:
- Can my Canadian advisor legally oversee my U.S. accounts if he/she is not registered in the U.S.? Same goes for my U.S. advisor legally overseeing my Canadian accounts?
- Can I hold my Canadian investment account in a U.S. Trust?
- Does contributing to a Canadian retirement account, such as an RRSP, make sense if I don’t plan on living long-term or retiring in Canada?
- If I retire in Canada, how do I know whether to pull money from U.S. or Canadian investment accounts to support living expenses?
If this is you, it’s time to speak with an advisor that is qualified and understands the unique tax and estate requirements of managing assets on both sides of the USA/CAN border.
Did You Know?
As an American in Canada, it’s important to be aware of the following:
- Taxable investment accounts (non-retirement accounts) must be Passive Foreign Investment Company (PFIC) compliant. The overwhelming majority of Canadian-traded mutual funds and ETFs are considered PFICs and should be avoided by all U.S. citizens. Holding PFICs can create very harsh U.S. income tax consequences
- Canadian Tax-Free Savings Accounts (TFSAs) and Registered Education Savings Plans (RESPs) should not typically be opened because they are not granted tax-deferred status by the IRS and the foreign account disclosure reporting costs for these plans could outweigh the benefits.
- A U.S. retirement account (e.g., 401(k), IRA) can be moved to your Canadian retirement account (e.g., Registered Retirement Savings Plan or RRSP) but in most cases, the U.S. tax consequences outweigh the benefits in doing so.
- Your Canadian and U.S. investment accounts should be structured to complement one another in order to avoid duplication of investment costs and double taxation issues.
- If you are accumulating money inside a Canadian retirement account such as an RRSP and plan to return to the U.S. one day, there are ways to apply currency management to your accounts and ultimately hold your RRSP in U.S. dollar investments.
- Never leave your old U.S. address or a U.S. family member’s address on file as the address of record for your U.S.-based investments accounts. Always change them to your Canadian address. As a Canadian resident, make sure the correct amount of withholding tax is being applied. Otherwise, the IRS and CRA, who share information, could both challenge your residency status, leading to the threat of double taxation.
- Select investment accounts must remain in the U.S. while select investment accounts must be kept in Canada based on compliance and regulatory rules.
Ready to take the Next Step?
Whether you are transitioning residency between the U.S. and Canada or you have already made the move but continue to hold investment assets or financial interests in both countries, proper cross-border financial planning can integrate and coordinate the asset management of your investments, reduce taxes and maximize your estate.
If you would like to discuss your cross-border financial planning needs or request further information, please complete our contact form and a Cardinal Point representative will reach out to you.