6 Tips for Cross-Border Financial Planning in Canada and the US

Tiffany Woodfield
Apr 8, 2021
5 min read

Updated: 6 days ago

Written by Tiffany Woodfield, TEP, Associate Portfolio Manager, CRPC®, CIM®

When you plan a move from the US to Canada or vice versa, it's important to get the financial planning steps right.

As a dual-licensed financial advisor, I've helped many people successfully manage their investments as they move across the border. Based on this experience, here are my top five tips for planning your finances and taking care of your investments when moving across the border.

This article is not intended to provide legal or tax advice; it is general in nature. You need to speak to a qualified professional to understand your particular situation.

Tip 1 - Avoid a Tax Hit By Doing Your Tax Planning in Advance

To avoid a surprise tax hit, do your tax planning in advance.

Arrange a pre-move consultation with a cross-border accountant and a cross-border financial advisor.

Discuss your specific situation, such as the investments you own in registered plans such as IRAs and 401(k)s versus open or non-registered accounts. Discuss your business and personal property details and how this will be impacted when you cross the border.

Tip 2 - Consider Investment Management to Prevent Your Assets from Being Frozen

There are so many moving parts when considering a cross-border move.

You may not have considered the investment management of your assets. Because of regulatory rules, most investment advisors are not licensed to manage your investments once you cross the border.

This results in the assets in your 401(k) or IRA being either frozen or not actively managed.

Typically as soon as you update your address to a Canadian one, you will receive a letter stating you have 30-60 days to find another advisor or liquidate your account.

It would be best if you met with a dual-licensed advisor before you move, so you can begin planning how to manage your US and Canadian investments.

Tip 3 - Stay Onside with the IRS

Working with a professional team who understands both sides of the border allows you to stay onside with the IRS and avoid costly mistakes.

The Canada-US Income Tax Treaty is designed to ensure that one country's resident is not taxed on the same income in the same year as the other country. You don't have to be worried about having a huge tax burden when you move as long as your ducks are in a row.

As a US citizen or green card holder, you are required to file an annual tax return with the IRS on your worldwide income regardless of where you live. Working with a cross-border accountant and dual-licensed financial advisor will prevent you from having any issues with the IRS.

Tip 4 - Work with a Cross-Border Wealth Management Firm If Your Assets Are Over $1,000,000

With more wealth, the complexities of a cross-border move increase.

You need to understand the options available to you to avoid a surprise taxable event. Having a team who knows how to make your cross-border move smoother will save you time in the long run.

Some of things to consider are:

The location of your assets and where you are considered a permanent resident.
If you a US person or on a working visa?
Whether you have an estate and financial plan that takes into consideration income and assets in both countries.
Have you considered how to transfer your wealth to beneficiaries?

Watch the Video: Certified Financial Planner Canada

Tip 5 - Estate Planning: Avoid Using a Non-Resident as the Executor of Your Will

Estate planning between Canada and the US adds additional complexity.

As a Canadian resident, you should speak with a lawyer about updating your will for Canada. This is important as you likely won’t want to use a non-resident as the executor of your will. This is because the CRA may determine it as a non-resident trust, and you could face double taxation.

Having a revocable living trust in the US once you move to Canada may add additional complexities. At Raymond James, we offer trust services to help clients who need an executor, trustee and/or a power of attorney.

Please note that before you start any estate planning, you should always consult with a lawyer to understand your particular situation.

Tip 6 - Are you a Covered or Non-Covered Expatriate?

When moving, one additional consideration is whether you will renounce your US citizenship or (as a long-term green card holder) give up your visa status.

You need to determine the following: if you expatriate from the US are you considered a covered or non-covered expatriate?

If you are covered, you may be required to pay the exit tax and will need to do exit tax planning for the complicated tax consequences. This tax considers that all assets are sold the day before you gave up your US citizenship or terminated your visa.

Please speak to your cross-border accountant to determine if you are a Covered or Non-covered Expatriate and to do your tax planning.

Note: Long-term green card means that you held a green card for 8 of the last 15 years.

Covered vs Non-Covered Expatriate

Next Steps

If you’re a Canadian resident or are planning on moving to Canada or the US and need assistance with moving and optimizing your investments, estate planning, wealth management and portfolio management, please get in touch. At SWAN Wealth, we specialize in Canadian financial planning, cross-border financial planning and cross-border wealth management.

If you’re planning a cross-border move, these articles and guides will help simplify your move and ensure everything is covered.

About the Author

TIFFANY WOODFIELD

Tiffany Woodfield is an Associate Portfolio Manager licensed in Canada and the USA, a Chartered Investment Manager (CIM), a Chartered Retirement Planning Counselor (CRPC), a Trust and Estate Practitioner (TEP) and the co-founder of SWAN Wealth Management, along with her husband, John Woodfield. Tiffany advises clients who live in Canada and the United States and want to simplify their cross-border financial plan, move their assets across the border, and optimize their investments to minimize their tax burden. Together, Tiffany and John Woodfield help their clients simplify their cross-border finances and create long-term revenue streams that will keep their assets safe whether they live in Canada or the U.S.