When you inherit an Individual Retirement Account (IRA) while living in Canada, you might not know all the options available to you.
When you work with a cross-border advisory team licensed in Canada and the US, they can manage IRAs whether you live in Canada or the US.
At SWAN Wealth, we offer solutions on how to withdraw the money, whether you inherit an IRA in Canada or the US. We also offer advice on how your inherited IRA can be managed.
WHO WE HELP
Canadians Moving from the USA to Canada
SWAN helps Canadians who are moving back to Canada from the USA and need help managing the financial transition and ensuring their investments are optimized.
Americans Moving to Canada
SWAN helps Americans and Green Card holders moving to Canada for retirement, work, or a work-optional lifestyle. If you have Roth IRAs, 401(k)s, and non-registered investment accounts, we can help.
Americans Living in Canada
If you're already living in Canada, you need to make sure your investments are optimized for your residence and you're not overpaying your taxes. SWAN provides portfolio management and cross-border financial planning.
Prevent Cross-Border Complications
What you may not know is that an IRA keeps its tax-deferred status regardless of whether a spouse, children, or grandchildren are named as beneficiaries.
Additionally, the SECURE Act in the US mandates that most non-spouse beneficiaries inheriting an IRA must take distributions that empty the account within 10 years.
At SWAN, we offer a multi-currency platform, so we can manage investments in Canadian or US currency regardless of which side of the border you live on.
Tax Implications of an Inherited IRA in Canada
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If you are a resident of Canada with an inherited IRA, it can be taxable in both the US and Canada when you take money out. If you are a US person, you would report it on your US tax return and as a non-US person, there likely would be withholding taxes to cover the tax liability.
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You may be eligible for foreign tax credits. This helps avoid double taxation, but proper reporting is essential. Working with a cross-border accountant who understands this is critical.
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The Canada-US Tax Treaty can provide relief. Working with a cross-border advisor and tax expert ensures you take full advantage of treaty benefits.
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Mistakes can lead to unexpected tax bills. Failing to plan appropriately could mean paying more tax than necessary.
Inherited IRA Distribution Types
The Internal Revenue Service (IRS) has specific rules for inherited IRAs.
Your options depend on whether you are the spouse or a non-spouse beneficiary. If you inherit an IRA from someone other than your spouse, you cannot treat it as your own. Instead, you must follow IRS distribution rules, which determine when and how you withdraw the funds. Choosing the best method is crucial because it affects your taxable income in the US and Canada. The wrong choice could result in higher taxes, penalties, or complications when filing cross-border tax returns.
Lump Sum Distribution
When you withdraw the entire IRA balance in a single year, the IRS treats it as fully taxable income.
Canada also considers it pension income , meaning it may be subject to tax on both sides of the border. This can push you into a higher tax bracket, significantly increasing your total tax bill. While foreign tax credits may help offset double taxation, the immediate tax hit can be substantial. This option may work if you need quick access to funds, but careful tax planning is essential to avoid an unnecessary tax hit.
10-Year Distribution Rule
Under US tax law, most non-spouse beneficiaries must empty the IRA within 10 years.
In other words, if you're not the spouse of the deceased, you must withdraw all the funds within a decade. There are no annual withdrawal requirements, so you can choose when to take distributions. However, waiting until year 10 to withdraw everything could create a massive tax burden.
The entire amount would need to be reported on your tax return in both the US and Canada. This can lead to a significant tax bill. A well-planned withdrawal strategy can help spread the tax impact and reduce your overall liability.
Surviving Spouse Acts As The Sole Beneficiary
Spouses have more flexibility.
If you inherit an IRA from your spouse, you have the option to roll it into your own IRA or follow the inherited IRA distribution rules. Rolling it over allows you to defer required minimum distributions (RMDs) until you reach age 73, which can provide years of continued tax-deferred growth.
This option also lets you control how and when to withdraw funds, potentially lowering your annual tax burden. If you need access to the money sooner, you can take distributions under different rules.
Tax Pitfalls To Avoid When Inheriting an IRA
Inheriting an IRA can lead to unexpected taxes if you are not careful.
You may be subject to tax in the US and Canada and, without proper planning, you could owe more than expected. Here are key pitfalls to avoid:
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Taking a lump sum withdrawal – The entire amount may be subject to tax in both countries, which can push you into a higher tax bracket and significantly reduce your inheritance.
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Missing required withdrawals – If you are subject to required minimum distributions (RMDs) or the 10-year rule, failing to withdraw on time can result in IRS penalties of up to 25%.
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Incorrect tax reporting – The IRS and CRA classify IRA income differently. If you don’t claim the right foreign tax credits, you could be taxed twice on the same income.
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Assuming all inherited IRAs are treated the same – Spouses have different withdrawal options than non-spouse beneficiaries. Choosing the wrong strategy can lead to higher taxes.
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Failing to plan for currency exchange – If you need to convert US dollars to Canadian dollars, currency fluctuations can impact the value of your withdrawals.
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Ignoring estate tax considerations – If the deceased had significant US assets, the estate tax may apply. Proper planning helps you determine if estate taxes need to be paid.
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Investing the funds improperly – Leaving the IRA in cash or choosing unsuitable investments can hurt long-term growth and tax efficiency.
Key Concepts To Understand When Inheriting an IRA in Canada
Eligible Designated Beneficiary:
Certain beneficiaries, such as spouses, minor children, or disabled individuals, are eligible for special distribution rules that allow them to stretch withdrawals over their lifetime instead of the standard 10-year rule.
Inherited Roth IRA:
Inherited Roth IRAs are treated differently from traditional IRAs because withdrawals are generally tax-free in the US. However, Canada may tax the distributions if not properly reported.
Required Minimum Distributions (RMDs):
If you inherit a traditional IRA and are an eligible beneficiary, you may have to take annual withdrawals based on your life expectancy. This is called an RMD. If you are not an eligible beneficiary, you must withdraw all funds within 10 years.
Foreign Tax Credit:
Since IRA withdrawals are taxed in both the US and Canada, a foreign tax credit may help offset double taxation, reducing your overall tax burden. You should work with your accountant and cross-border financial advisor to ensure you minimize the tax hit of this inheritance.
Estate Taxes:
While the US estate tax generally applies to large estates (over $13.99 million in 2025), it can affect Canadian residents who inherit from a US citizen with significant assets. If you are a Canadian inheriting an IRA and the deceased’s worldwide estate exceeds $13.99 million in 2025, you may need to ensure US estate taxes are paid on the portion of the estate above this threshold, as adjusted by the Canada-US Tax Treaty.
Income Tax Deduction:
Some IRA-related expenses or contributions may offer deductions in the US, but they may not apply when the account is inherited.
Surviving Spouse Sole Beneficiary:
If a surviving spouse is the sole beneficiary of an IRA, they have the option to roll it into their own IRA or follow inherited IRA rules, giving them more flexibility in managing taxes and withdrawals.
When To Work With a Cross-Border Financial Advisor
An inherited IRA is a US account, but living in Canada changes how you manage it.
Tax rules are different in each country, and without expert guidance, you could pay unnecessary taxes. A cross-border financial advisor helps you understand your withdrawal options, manage foreign tax credits, and invest in both US and Canadian currency.
If you have significant assets, strategic cross-border planning will ensure your inheritance aligns with your long-term financial goals.
Working with a qualified cross-border advisor or wealth management team ensures you comply with both US and Canadian laws, keeping as much of your inheritance as possible.
At SWAN Wealth Management we help in the following ways:
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Manage your IRA and retirement accounts from Canada or the US
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Offer a pre-immigration consultation from a tax perspective before you move
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Guidance on retirement benefits such as CPP, social security and Medicare
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Transfer your investments from the US to Canada keeping them in a tax deferred account
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As a portfolio manager we are not limited to just investing in mutual funds but can choose holdings tailored to your individual needs
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Hold investments in US and/or Canadian currency on both sides of the border
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Minimize your tax burden by creating a tailored financial plan
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Manage your investments over the long-term so you can retire happy
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Provide access and management to your investments no matter on which side of the border you live
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Understand the tax implications of various investment strategies
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Create a financial plan that serves you in the short- and long-term
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Act in accordance with our fiduciary duties to ensure every aspect of your financial plan is in your best interest
To get started simplifying your cross-border finances and investments, schedule a call below.
About SWAN Wealth Management
At SWAN Wealth Management, our clients come to us because they value education and expertise and are looking for a guide.
They want to make smart decisions and avoid costly mistakes.
We have created the videos and articles on our website based on common questions from clients over the years. Most of our clients are experts in their field, and now they want an expert to guide them.
If you go to a bank or team that doesn't specialize in cross-border, you are at a higher risk of being invested in the wrong things. Many people think that working with a big bank will ensure everything is managed correctly. But unless your advisor is a cross-border expert, your investments may not be perfectly optimized.
Remember that cross-border financial planning is more complex than regular investing and financial planning.
Any mistake can cost you at tax time and give your accountant a serious headache.
When you first meet with us at SWAN, we first want to understand you. We want to know where you are now and what got you to this stage. Only after understanding this do we start to offer education and strategies.
We act as your guide through different life stages and transitions of wealth. Although most of our clients have assets or interests on both sides of the border, each person is unique.
We tailor our advice and services to your needs.
Common Questions
Yes, but only if they lived and worked in the US and contributed before moving to Canada. Canadians cannot open or contribute to a new IRA while living in Canada, but they can inherit one from a US person.
The IRA remains a US account, and the beneficiary must follow US tax rules. Canada also taxes withdrawals, but tax treaty benefits can help reduce double taxation. Working with a cross-border advisor ensures you make tax-efficient decisions.
The CRA treats IRA withdrawals as pension income. You must report the income on your Canadian tax return, but foreign tax credits may help offset US taxes paid on the same distributions.
Yes, Canada taxes IRA withdrawals as pension income. However, you may be able to claim a foreign tax credit for US taxes paid, reducing your overall tax bill.
The US estate tax only applies if the deceased’s total assets exceed the exemption threshold ($13.99 million in 2025). Most Canadians inheriting an IRA won’t owe estate tax, but they will still face income tax on withdrawals.
First, avoid making withdrawals until you understand your options. Work with a cross-border financial advisor to choose the best tax strategy. Your decisions will impact how much tax you pay in both countries.
You can withdraw as a lump sum, over 10 years, or—if you are an eligible beneficiary—over your lifetime. Each option has tax consequences in both the US and Canada, so careful planning is needed to avoid unnecessary taxes.
There’s no early withdrawal penalty but failing to take required distributions on time can lead to IRS penalties. If you wait too long to withdraw, you may also face a large tax bill in year 10.
No, inherited IRAs cannot be contributed to or rolled into other retirement accounts. They exist only for withdrawals, and the funds must be distributed based on IRS rules.
The closest equivalent is the RRSP (Registered Retirement Savings Plan), which allows tax-deferred growth like a traditional IRA. However, RRSPs have different contribution and withdrawal rules.
No, but they share similarities. Both allow tax-deferred growth, but RRSP contributions are tax-deductible in Canada, while IRA contributions are deductible in the US. Withdrawal rules and tax treatment also differ between the two countries.
Ready to Simplify Your Cross-Border Finances?
At SWAN Wealth Management we know that you want to be free to enjoy your life in Canada.
In order to do that you need a cross-border financial plan that’s tailored to your needs. Your US advisor can’t help you move or manage your investments in Canada, and you might be worried that you’re going to miss something during this transition.
We believe that moving your assets to Canada should be simple and easy. We understand how complex this process can appear — especially since it’s difficult to find clear information online.
That’s why we specialize in helping cross-border clients like yourself.
With over 25 years of experience as Certified Financial Planners and Portfolio Managers, we ensure your cross-border financial plan fits your needs and protects your assets.
Here’s how the process works:
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Schedule a 15-minute introductory call.
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Meet with a Financial Advisor.
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We create a cross-border plan.
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Together, we start the process.
To get started, schedule a 15-minute introductory call.
In the meantime, here’s our Cross-Border Moving Checklist, so you’ll be able to stop worrying about whether you’re missing something and instead relax and enjoy your next adventure.
Raymond James (USA) Ltd. All rights reserved. Raymond James (USA) Ltd. (RJLU) advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered. Therefore, a response to a request for information may be delayed. Please note that not all of the investments and services mentioned are available in every state. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Contact your local Raymond James office for information and availability. This website may provide links to other Internet sites for the convenience of users. RJLU is not responsible for the availability or content of these external sites, nor does RJLU endorse, warrant or guarantee the products, services or information described or offered at these other Internet sites. Users cannot assume that the external sites will abide by the same Privacy Policy that RJLU adheres to. Investing in foreign securities involves risks, such as currency fluctuation, political risk, economic changes, and market risks.
