Retiring to Canada and help with with taxes and investments

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Question

Hi

I found your contact information on the Americans in Canada facebook group. I wanted to reach out to try and schedule a future appointment or consultation. Please let me know how I can book such a meeting. In preparation for this meeting I can give you some context for our situation and a list of question my wife and I have.

Information

  • My wife is a dual Canadian and US citizens
  • I am a US citizen applying for my permanent residency in Canada
  • I’m aware that we will need to be filling both Canadian and US returns upon our entry to Canada
  • We are moving to Canada with no intention of working. Fully retired this year
  • We do not own any Canadian assets other than a house we are trying to buy
  • We have the following assets located in the US: IRA, Roth IRA, small 401k, non-IRA investment account, a revocable trust (includes our current house and some investments)

Questions

  • How do we transfer our investments to Canada?
  • Should we keep our revocable trust?
  • What happens if we can’t sell our house before we move to Canada?
  • Should we open up an RRSP when we get to Canada?
  • We have children in the US that will inherit our estate. What issues should be addressed with respect to this?

Thanks for your consideration.

XXXXXX

Answer

Hi XXXXX

Thanks for the email. There’s certainly a lot to unpack here and it will be necessary to review these issues with a proper consultation, however I’ll outline some of the issues below so you can better understand the tax and financial ramifications of the move:

  • Yes, you’ll need to file both Canadian and US income tax returns after you retire to Canada. Note however that in the first year of Canadian residency you’ll need to file an entry/part-year Canadian return. This will allow you to verify your Canadian entry date with CRA.
  • In most cases it will be much more efficient to transfer your investments to Canada. Especially considering you’re not moving back to the US. We can help arrange the transfer of the IRA, ROTH and other investments to Canada. We can chat in more detail when we have the call.
  • We’ll also need to ensure we file an election with CRA for the Roth IRA to ensure it remains tax-free in Canada.
  • The trust will be important to review before you become a Canadian resident. The revocable trust can work well for US residents, however considering how high the current estate tax exemption currently in addition to the fact that the trust will require Canadian trust (T3 returns) filings, it likely will be more efficient to wind up the revocable trust and transfer the assets into your personal name.
  • When possible I would suggest you sell the house before moving to Canada. Unless of course you want to keep the house for personal use or rent it out. You’ll also want to ensure you sell it within 2 years of moving to ensure you maintain access to your US principal residence exclusion.
  • If you’re not going to be earning any employment, rental or business income while a resident of Canada you won’t need an RRSP. We do have the ability to transfer some of the IRA to an RRSP, however we can have it managed in Canada, therefore this shouldn’t be required.

We’ll need to review your estate plan in more detail to properly assess how to eventually transfer your assets to your US beneficiaries. We’ll want to introduce you to one of our cross-border lawyers to review this plan and potentially assess whether dual country wills are required.

Once again, you have a fair amount going on here. You won’t need to file tax returns until the year after you move, so they’ll one a fair amount of time to plan for this.

We’ll need to review the investments and subsequent transfer of assets to Canada soon. This will be much more pressing.

Let’s connect soon to schedule a call and we can chat more regarding the above.

Cheers

Phil Hogan
250-661-9417

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