Wealth Management Strategies for Americans Moving to Canada

Video Script

In this video, I’m going to go over 5 key wealth management strategies for Americans living in or moving to Canada. If you want to protect your assets when you cross the border, this is for you.

Stay to the end to find out the biggest tax trap that Americans living in Canada accidentally walk into every single day.

It's an extremely common mistake. And if you have a large portfolio, it could cost you hundreds of thousands of dollars.

I’m Tiffany Woodfield, a Cross-Border Financial Advisor and the co-founder of SWAN Wealth Management.

I work with US and Canadian clients every day, and over the years, I’ve seen hundreds of smart people make very costly mistakes.

That’s why I make these videos. I want to help you avoid the big mistakes and create a proper plan.

So let’s get into it!

1 - Get Your Estate in Order

Estate planning in Canada is completely different from that in the US. There are four main pitfalls you should know.

First, Canada has what’s called a deemed disposition at death. This means that when you pass away, it’s like all your assets, including investments accounts and properties, were sold at fair market value.

Your estate’s unrealized capital gains from non-registered investment accounts will be taxed. And RRSP and RRIF accounts will be deemed to be fully distributed on the date of your death.

In many cases, more than half the estate can be lost to the government.

This is much different than the US. In the US, you’re only subject to tax on death if you exceed the US lifetime estate tax threshhold. Currently, that threshold is $15 million.

Next, trusts are treated differently in Canada.

You likely do not want to hold a US revocable living trust when you move to Canada, as it could lead to double taxation. In addition, where your beneficiaries live matters. If you’re trying to ensure that beneficiaries get equal amounts, you have to think about taxation.

If one of your kids lives in the US and the other lives in Canada, their inheritance may be taxed differently.

Some assets are more tax-efficient to pass to a Canadian resident; others are better for a US resident. If your estate is worth $5M, even a small tax efficiency gap between beneficiaries can mean hundreds of thousands of dollars lost.

If you have more than $10M, this is potentially a seven-figure problem.

2 - Never Name a US-Based Executor for a Canadian Estate

I know we just talked about estate planning, but this is so important that it deserves its own section.

If you’re currently living in the US, you probably have a US executor for your will.

But after you move to Canada, if your executor lives in the US, the CRA could treat your estate as a foreign trust.

That’s not good.

If your estate gets classified as a foreign trust, your beneficiaries could face double taxation.

If you’re a Canadian resident, the solution is to have an executor who also lives in Canada. And the best option may be to use a corporate independent trustee.

Then you don’t have to worry about people moving and creating the tax risk all over again.

3 - Move Your US Taxable Brokerage Accounts to Canada

Many people think that moving their investments across the border triggers taxation. But that’s typically not the case.

The taxable event happens once you become a Canadian resident and receive investment income or realize capital gains. If you’re a US person living in Canada, you need to report your income to two countries. And, you need to do this no matter where your investments are located.

Taxation is typically based on the country where you’re considered a tax resident when you receive your income. People often move and think they’ll keep it simple by leaving their investment accounts in the US.

Not only are you not minimizing taxes by doing this, but you’re also creating complexity.

You’ll have to report those investments to Canada, and you won’t have the correct tax receipts, cost base, or currency.

Your accountant will need to manually calculate everything for your tax filings in Canada. This is inefficient and will cost you money at tax time.

In fact, many accountants won’t do it because they’re too busy at tax time. Also, once you become a non-resident of the US, your US brokerage firm isn’t allowed to give you advice or manage your investment accounts. This is according to the SEC regulations.

Finally, if your investments are in Canada and the US, optimizing your portfolio and creating income streams is much more difficult.

Basically, it’s very inefficient to keep your taxable US accounts in the US.

4 - Invest in Canadian Dividend-Paying Stocks for Tax Efficiency

Once you live in Canada, investing in Canadian dividend-paying stocks can be a great solution if you are looking for tax-efficient income.

This is because Canadian dividends are taxed much more favourably than interest income or foreign dividends.

For example, let’s say you live in BC and receive $100,000 in eligible dividends.

For the current tax year, you would pay just over $3,000 in income tax on that dividend. If that same $100k were interest income, you would pay just over $20,000 in tax.

That’s more than a 6x difference.

Next, we’re going to talk about the biggest mistake I see Americans living in Canada make.

But first, if you're planning on moving to Canada in the next 12 months, click the link in the description box to get help from my team. We work with families and professionals who have substantial assets and want to protect what they’ve worked hard to build.

5 - Avoid PFICs Like the Plague

PFIC stands for Passive Foreign Investment Company.

As a US person living in Canada, you have to report your worldwide income to Canada and the US. Even if you earn the income in Canada, you still need to report it to the US — and vice versa.

Everyone is worried about compliance, complexity, and overpaying taxes. That’s why you should avoid PFICs. In Canada, PFICs are taxed like any other investment. But the IRS adds its own punishing rules on top of that.

When you sell a PFIC, the gain may get spread back across every year you held the investment. And interest charges may be added on top.

This makes the bill much larger than a regular capital gain. The tax hit can be 3-4x higher than normal.

On top of that, you have to file IRS Form 8621 for every PFIC annually.

Cross-border accountants charge anywhere from $200 to over $1,000 per form.

So, if you have 15 to 20 PFICs in your portfolio, you could be paying $3,000 to $20,000 every single year just to stay compliant.

That’s before you pay the tax bill itself.

So, what should you do?

How to Handle PFICs

1. Keep it simple, and avoid buying Canadian mutual funds and ETFs.

2. You can hold individual Canadian stocks.

3. You can use US stocks and US-listed ETFs.

4. You can hold Canadian ETFs in your RRSP or IRA account without PFIC reporting requirements.

When Should I Create a Plan?

This is one of the most common questions I get.

Most people think they don’t need a cross-border advisor until they’re ready to move.

But that is like training for a marathon the week before race day. You can still do it, but it’s way harder than it needs to be — and you probably won’t win the race.

When you don’t have a plan, you’re in limbo.

You have to deal with decision fatigue and uncertainty every time you think about the move.

As soon as you know that you want to move to Canada, start working with a cross‑border advisor — even if the move is 2-3 years out.

From there, you’re free to make clear decisions about when and how to move.

Thanks so much for watching, and I’ll see you in the next video!