[ 00:00:09 ]Are you an American considering retirement in Canada or a Canadian contemplating an employment opportunity in the U. S.? If so, numerous cross-border financial planning considerations are a foregone conclusion. In this video, we will explore high-level details for both the U. S. and Canadian expat scenarios.

[ 00:00:33 ] Exiting the US and establishing Canadian residency requires an integrated approach to all your cross-border wealth management affairs. This includes the coordination of your immigration status, customs planning, cash flow and investment management, tax planning, risk management, as well as your retirement and estate planning needs. We’ll focus on some of the more pertinent components. There is a method to the madness at the border when it comes to the Canadian Border Services Agency or CBSA protocol. When you enter Canada, you need to have a detailed list of all your personal items you are bringing with you on CBSA form BSF 186 and those that will follow later or goods to follow on CBSA form BSF 186A. The list should be given to the border officer when entering, even if the goods will follow at a later date.

[ 00:01:29 ] Additional CVSA documentation is required when bringing specialty belongings such as vehicles or pets. The Canadian medical system is vastly different from its U. S. counterpart. Some provinces enact a waiting period of up to three months prior to becoming eligible for provincial healthcare. Therefore, it is imperative that health insurance is purchased to cover those gaps. Married couples who file jointly in the U. S. may be surprised when they learn their income is taxed on an individual basis when in Canada. Where possible, efforts should be made to equalize the spouse’s asset base in order to shift future investment income to the lower-income spouse and save on total household Canadian income tax. This can only be done proactively, so tread carefully. Another strategy to explore prior to Canadian tax residency and entry is a Roth conversion.

[ 00:02:33 ] This involves converting assets from a pre-tax IRA or 401k to a tax-free Roth IRA. If the tax rate on conversion is less than the expected future Canadian income tax rate on IRA or 401k withdrawals, then a Roth conversion, especially over a multi-year period prior to Canadian tax entry, can be a useful tax planning strategy. It should be noted that U. S. tax planning structures such as a limited liability company or U.S. Revocable living trusts are not conducive to efficient Canadian tax planning. In fact, they can result in double taxation. Alternative solutions to these tax and estate planning structures can be integrated into a cross-border financial plan by Carlow Point Wealth Management prior to a U. S. expatriation. Unlike the U. S., Canada has RRSP and TFSA accounts to aid in the accumulation of wealth.

[ 00:03:40 ] If U. S. tax residency is maintained, the TFSA account is not ideal, as the investment income will continue to be taxed in the U. S. in spite of being tax-free in Canada. Up to the lesser of $31,560, less any pension adjustments, or 18% of the previous year’s income. Furthermore, the Canada Pension Plan withholdings are far less than U. S. Social Security taxes, culminating in a lower CPP benefit relative to U. S. Social Security. Trusts are not as common an estate planning tool in Canada as in the US. This is due to the US revocable living trust flow-through taxation on the personal income tax return. In Canada, the trust is separate and taxed at the highest personal marginal tax rate commencing at a lower threshold and is deemed disposed of every 21 years after the trust creation.

[ 00:04:51 ] Double taxation ensues when U. S. persons maintain mine and management of their U.S. As a Canadian tax resident, your estate planning documents also need recalibration as a U. S. expat. Just as a U. S. departure requires careful cross-border financial planning and coordination, so too does Canadian exit planning when relocating to the U. S. Similar to the CBSA, the U. S. Customs and Border Protection enlists a process to smoothly transition household goods duty-free from Canada to the U. S. This is accomplished via Customs Declaration Form 60-59B for goods accompanying you and Form 32-99 for goods to follow at a later date, as is the case in utilizing a moving truck. Like CBSA, the CBP also has special protocols for additional items such as firearms, jewelry, pets, or vehicles to name a few.

[ 00:06:07 ] There could be a whole video created specifically on U. S. healthcare. As a Canadian expat, it’s imperative that U. S. health coverage is acquired. If the Canadian expat assumes US employment, it’s likely health care coverage can be obtained via the employer’s health care plan. If relocating for another reason, private insurance must be obtained. Without health care insurance, you are exposed to significant financial liability. Canada taxes its citizens based upon the residency and not on citizenship. Therefore, Canada imposes a departure tax on movable property when Canadian residents become expats. It is the CRA’s final ability to tax assets that could be transitioned out of the Canadian tax system. Departure tax does not apply to certain types of assets, including, but not limited to, Canadian real estate, Canadian business property, and assets held within Canadian registered accounts.

[ 00:07:14 ] Surrendering Canadian tax residency involves cutting tax ties to Canada. Therefore, it is mission-critical to establish a primary residence and employment in the U. S., as well as relinquish Canadian healthcare and driver’s license. Your new US address should replace your old Canadian address on anything that you own or have Title II. This action has a direct impact on control over your investment management. As a Canadian expat, all registered accounts remain in Canada but are registered to your US address. Any non-registered asset should follow you to the US in order to follow proper investment, tax, and regulatory laws. At times, the Canadian dollar to US dollar foreign exchange rate is simply unattractive. At Carla Point Wealth Management, we can transition the non-registered Canadian dollars account to the US.

[ 00:08:16 ] And invest in Canadian dollars while you wait for the foreign currency exchange rate to improve. Furthermore, it is common for accounts remaining in Canada to become frozen. This is because the firm holding the assets is not licensed in the U. S. Here too, as a duly licensed portfolio management firm, Cardinal Point Wealth Management removes and unlocks those investment shackles. Many U. S. employers establish retirement accounts for their employees, such as a 401(k), 403(b) or 457 plan. Generally speaking, contributions are made on a pre-tax basis and subject to a maximum $23,000 for tax year 2024 or $30,500 if the employee is 50 and above in tax year 2024. Outside of an employer plan, The US allows for a personal IRA or Roth IRA to help individuals build wealth.

[ 00:09:21 ] Maximum contributions to these personal accounts cannot exceed $7,000 for those under 50 and $8,000 for those age 50 and above. Personal IRA or Roth IRA account contributions are subject to income limitations. Coordination of investment account titling and will substitutes is critical for U. S. estate planning purposes. Unlike Canada, the U. S. allows for a transfer on death designation for all taxable investment accounts. Mitigating the size of the probate estate is vital, and Canadian expats need to update their estate planning documents to account for their new set of realities with respect to U. S. estate law.

[ 00:10:13 ] The high-level details discussed in this video are the tip of the iceberg when it comes to cross-border wealth management for Canadian or US expats. Creating a cross-border financial plan through Cardinal Point Wealth Management amidst this major transition is essential. If you found this information helpful, don’t forget to like, share, subscribe for more insights on managing your wealth across the Canada-US border. Thanks for watching. and safe travels.