Each year I help over 500 clients file their Canadian and US tax returns as well as plan for both their Canadian and US investment accounts. I also regularly help new US clients plan for their move to Canada.
I’ve just recently joined the Americans in Canada Facebook page and have been following your posts. All good stuff.
We moved to Kelowna last year from California and have a few questions related to our investments in the US.
I’m a dual citizen and my husband is a US citizens and recent Canadian permanent resident. During our time in the US we’ve accumulated a fair amount of assets including our principal residence and a rental property. We’re in the process of trying to sell our California home but we will be keeping our US rental property (also in California).
We also have the following assets:
traditional IRA, ROTH IRA, an RRSP from when I lived in Canada, regular investments with Fidelity and a small pension from the company I worked for in the US.
When talking with my Fidelity advisor they mentioned that I need to have a US address on the account in order to keep it in the US. Does this seem right? I guess I can put my brother’s address on the account, but I would rather not.
I’m assuming that we are taxed on the US investment accounts in Canada as well as the US? I’m just not sure how this works. We’re working with a Canadian accountant that referred us to a US CPA (we haven’t spoken yet).
I just want to make sure I have everything set properly so that we don’t run into problems in the future.
Are these the type of questions you can helps answer?
Thanks for the email. We should plan for a more detailed phone call, however I can give you some feedback based on the information you provided below.
US Real Estate Properties
You’ll want to ensure you can sell your California principal residence within 2 years of moving to Canada. If not, you may not be able to take advantage of your $500,000 principal residence exemption on the US side.
The rental property can be maintained in the US as long as all filing requirements are met.
In most cases it makes a lot of sense to move the US assets up to Canada. We have a team that can help manage both Canadian investments and US plans such as IRA, ROTH IRAs and 401k from Canada.
The reason Fidelity is suggesting someone with a US address list on the account is because they are not legally allowed to manage funds for Canadian residents. I would seriously question this suggestion from your advisor as it appears to be quite dangerous (for you and him/her)
It’s also a good reason to move the US investments up to ensure your T1135 reporting requirements are not overly complicated and expensive. Without getting into too much detail, the reporting on form T1135 for non-retirement investment accounts will be significant if held in the US. However, if these funds are held in a Canadian investment account the requirements are much more simplified.
No only that, but you really want an investment advisor that is looking at the portfolio from a Canadian-centric perspective. Most US investment advisors are not taking any Canadian planning into consideration including foreign currency hedging.
Expat Tax returns
As you likely know, as a resident of Canada you’ll be required to file both Canadian and US income tax returns each year, including any required foreign income reporting forms. Be careful using any accountant that does not have experience preparing and filing expat tax returns.
Hope that helps, let’s try to schedule a time to chat to see if we can work out a more detailed plan to help you properly plan for the move.