Moving to Canada with Investments, and I Need Help!

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Question

Hi there

I got your name from my mother that said that you help her with her Canadian and US tax returns. I’ll be moving back to Canada in 2020 and wonder if you are taking new clients.

I think my situation is quite complex but you likely see this stuff all the time.

As mentioned, I’ll be moving back to Canada after being away for for over 20 years. I’ll be moving from California to BC in mid 2020 and we to ensure I leave enough time to plan for the move.

Here’s my situation in a nutshell:

– Been in the US for 20 years
– Moving back in June 2020
– Moving back with my wife and 2 kids (13 and 15)
– Will be consulting from Canada for my US clients, will need help with this
– Have sizeable assets in the US that need to be transferred up or remain in the US? Need advice on this
– Assets include 401k, IRA, Roth IRA, revocable trust, house (hoping to sell soon) and regular investment account
– Total of all the above is close to $7 million

My questions are:

– What planning should be done before we move back
– I’m assuming I will be filing both Canadian and US tax returns in 2020 and beyond
– Should I keep my US assets in the US or move them up, if possible
– What if we don’t sell the house?
– Should we gift some assets to the kids?
– I would be interested in any other tax or financial efficiencies available

I look forward to hearing from you on the matters above.

Sincerely

XXXXX

Answer

Hi XXXXX

Thanks for the email and please say hi to your mother when you speak to her next. I haven’t seen her since last tax season.

Let me outline below some issues and answers to your queries above and then we can jump on a call to round out some of the issues:

  • Smart move to touch base as planning before you move to Canada from the US can be a lot more productive than waiting until you arrive.
  • We’ll need to review your situation in more detail, however in terms of initial planning we may want to review your IRA for opportunities for a ROTH conversion, consider winding up the revocable trust, review the non-registered investment account to see what assets may need to be sold and possible gifting to the kids.

To quickly answer some of your questions above:

  • Yes, when you arrive you’ll be filing both Canadian and US tax returns. In Canada we do not have jointly filed tax returns (although there is integration between spouses) therefore you’ll file 2 Canadian returns and a joint US tax return. In addition to the tax filing requirements you’ll likely need to file FBAR forms with the treasury department.
  • In most cases, for clients that will be moving to Canada permanently you’ll want to strongly consider transferring up all investment accounts to Canada. Legally (assuming your US broker doesn’t have a cross border license, which most don’t) the non-registered investments will need to be liquidated or transferred up to Canada. Having all your accounts in Canada, including new accounts such as RRSPs will make your investment management decisions and compliance a lot simpler.
  • It’s almost always more efficient to sell the house before moving up as the disposition will be subject to Canada disposition tax rules. That doesn’t mean you’ll pay Canadian tax on the sale, however your filing complexity will increase. You’ll also want to ensure the house is sold at least 2 year after you move up to ensure you can lock in your US principal residence deduction.
  • Potential gifting to the kids will take some planning, however there could be some significant overall tax savings if we can transfer some assets and future income to the kids. Especially considering the higher Canadian tax rates and historically higher US estate tax exemption. Let’s chat about this further.

I hope the information above was helpful, however to properly plan and gain a good understanding of your situation it would be important to meet and gather more information about your tax, financial situation and future goals.

Let’s chat soon.

Cheers

Phil

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