Moving to Canada from Florida – Should I keep our investments with our US broker?

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I have helped hundreds of people successfully navigate from the US to Canada. If you're thinking of moving or retiring to Canada contact me today to chat about your plans.

I can be reached via email at phil@philhogan.com, by phone at 250-661-9417 or through my contact page here.

I look forward to speaking to you soon.

Phil Hogan, CPA, CA, CPA (CO)
Cross-Border Tax and Investment Specialist

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Question

Hi Phil,

I’ve been an avid reader of your blog for years and have found your insights on cross-border tax matters invaluable. As we’re gearing up for a significant move in our lives, I thought it best to reach out to you for some guidance. If there’s a fee associated with your consultation, please let us know the process.

Here’s a snapshot of our current situation:

• My husband and I are preparing to move from Florida to Canada for our retirement. We’ve been living in the US for the past 15 years.
• I hold dual citizenship (US and Canada), while my husband is solely a Canadian citizen.
• We’re contemplating settling in either Toronto, where I have some old friends, or Montreal, where my husband grew up.
• While I’ll be fully retiring, my husband is considering some part-time advisory roles in his field of expertise.

Our primary concern revolves around our investments:

• Company Pension: I have a company pension from my previous employer in the US.
• ROTH IRAs: Both of us have ROTH IRAs that we’ve been contributing to over the years.
• Investment Accounts: We have a revocable trust that holds several investment accounts.

Given the complexity of our financial situation, especially with the dual citizenship factor, we have several specific questions:

1. Taxation on ROTH IRAs: How are ROTH IRA distributions taxed in Canada? Will the tax-free benefits we enjoy in the US continue in Canada?
2. Company Pension: Are there any Canadian tax implications if I decide to start drawing from my US-based company pension while residing in Canada?
3. Revocable Trust: How is the income generated from the investment accounts in our revocable trust treated for tax purposes in Canada?
4. Relocation of Investments: If we decide to move our investments to a Canadian financial institution, are there any exit taxes or penalties we should be aware of in the US? Our US broker has said he can continue helping us, however the accounts will be locked if we move to Canada.
5. Foreign Tax Credits: Can we claim foreign tax credits in Canada for taxes paid on our US investments?
6. Estate Planning: Given our dual citizenship and investment scenario, are there any estate tax implications we should consider for our heirs in both countries?

We truly appreciate any insights you can provide on this matter. Your expertise has always been a beacon for us, and we’re hopeful you can shed some light on our situation.

Warm regards,

XXXXXX

Answer

Hi XXXXX

Thanks for being a follower of the blog, much appreciated.

We’ll likely want to book a proper tax consultation to chat about these issues, but I’ll do my best to outline some of the more obvious tax and planning issues below:

• The company pension shouldn’t cause much of a tax issues, just want to ensure they withhold the appropriate amount of US tax when you start taking the pension.
• Once in Canada you’ll need to file specific treaty tax elections with Canada with respect to the ROTH IRAs. Also, depending on your incomes in the years before you move to Canada there may be an opportunity to convert some of the traditional IRAs to ROTH IRAs to save on future Canadian tax. If properly planned for, any future distributions from the ROTH will be tax-free for both Canadian and US purposes.
• It’s difficult to get into all the planning for the regular investments, however in short they should be reviewed for loss positions as the cost basis for Canadian purposes will become the FMV at entry, we can discuss this in more detail on our call.
• Also, in most cases it makes sense to wind up revocable trusts before entering Canada.
• Your current US broker is saying he can continue helping, however the accounts will be locked? That doesn’t sound like he will be able to help. We can help move the investment accounts to Canada without unnecessary liquidation or “locking” of the accounts. Not only do most US broker not have the license required to help Canadians with their investment accounts, they have little to no understanding of cross-border tax and investment planning.
• Yes, you’ll be able to claim a foreign tax credit for income on your US investments. However in most cases we try to minimize the amount of US source income (compared to capital gains and Canadian source dividends) as the US income can be taxed at much higher Canadian tax rates.

I hope the above has given you some valuable insights. We should book a call to discuss these issues in more detail.

Cheers

Phil