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Cross-border tax and financial planner Kris Rossignoli was featured in a timely and informative article published by Canadian Family Offices, about the critical importance of proactive planning for Canadians who have moved, or are planning a move, to the United States. As he emphasized, this applies to estate planning as well, for those with ties in both countries. Canadian business owners expanding into the U.S. are also confronted by myriad tax and financial issues that can be extraordinarily complicated. 

Individual taxpayers as well as businesses may even risk potential liability for fees, penalties, and other legal consequences if they are not in 100% compliance with all of the tax laws and financial regulations of both Canada and the United States. But Rossignoli shares keen insights and offers solutions as he points out common pitfalls that those engaged in a cross-border lifestyle or business should avoid. To learn more on this vital topic, access the full Canadian Family Offices article here.

Welcoming a new child is an exciting and life-changing event, but it also comes with major financial considerations. For parents in both Canada and the United States, the early years of a child’s life are a critical window for tax-efficient savings, thoughtful estate planning, and long-term financial security.

In this comprehensive guide, we explore the key education and investment accounts Canadian and U.S. parents should consider opening for their child, such as the Registered Education Savings Plan (RESP), in-trust accounts, 529 plans, and custodial accounts like UTMA/UGMA. We’ll also highlight essential steps in reviewing your estate plan, insurance coverage, and overall cash flow as your family grows.

Key Financial Accounts for New Parents in Canada

Registered Education Savings Plan (RESP)

The RESP is the cornerstone of education savings in Canada.

How It Works:

• Parents, grandparents, or other contributors can open an RESP for a child.
• Contributions are not tax-deductible, but growth inside the plan is tax-deferred. There is a $50,000 lifetime contribution limit per beneficiary.
• When withdrawn for post-secondary education, the income and grants are taxed in the child’s hands, typically at a low or nil rate. The original contributions come out tax-free.

Tax Advantages:

• The federal government provides the Canada Education Savings Grant (CESG), matching 20% of annual contributions up to $500 per year (on a $2,500 contribution), with a lifetime maximum of $7,200 per child.
• Additional grants and provincial incentives may be available for lower-income families.

Strategy Tip:
Start early—even small monthly contributions can grow meaningfully thanks to government grants and tax-deferred compounding. If you are a high-net-worth Canadian, run the math to see if you would be better off superfunding the RESP in the first year rather than making annual contributions.

In-Trust For (ITF) Accounts / Informal Trusts

These taxable investment accounts are often used when families want to gift funds to a child without the complexity of a formal trust structure.

How It Works:

• An adult opens an account “in trust for” a child.
• The account is legally owned by the adult (trustee), but the funds are intended for the child and become theirs when they reach the age of majority (usually 18 or 19, depending on the province).

Tax Implications:

• Attribution rules may apply: income from capital (dividends, interest) may be taxed in the contributor’s hands, while capital gains are typically taxed to the minor child.
• This makes the account more tax-efficient if investments are focused on growth (e.g., equities, ETFs).

Risks and Considerations:

• Lack of control: funds legally belong to the child at the age of majority and can be used however they choose.
• No contribution limits, but no government matching or deferral like an RESP.

Formal Trusts for Minors

While less common due to complexity and cost, formal trusts are an option for high-net-worth families seeking control over how and when funds are accessed.

Advantages:

• Custom terms can restrict access until a certain age or for specific purposes (e.g., education, home purchase).
• Potentially favorable tax treatment if structured to distribute income to a lower-income beneficiary (the child), but one must also be aware of the attribution rules.

When to Consider:

• Large gifts or inheritances.
• Concerns about protecting assets from early misuse.

Key Financial Accounts for New Parents in the U.S.

529 College Savings Plans

The 529 plan is the most widely used education savings vehicle in the United States.

How It Works:

• States sponsor 529 plans, but you can generally invest in any state’s plan regardless of residence.
• Contributions are made with after-tax dollars, grow tax-deferred, and withdrawals for qualified education expenses are tax-free federally and in many states.

Tax Advantages:

• No federal deduction, but many states offer a deduction or credit for contributions.
• High contribution limits—often over $350,000 per beneficiary, depending on the state.

Qualified Expenses Include:

• Tuition, books, room and board, and even up to $10,000 per year for K–12 private school tuition (state-dependent).
• Up to $10,000 in lifetime student loan repayments.

Strategy Tip:
Use “superfunding” to front-load five years of contributions (up to $95,000 per child per parent in 2025) without triggering gift tax. If there are unused 529 amounts after your child is finished with school, these can typically be transferred to another related child, invested for future grandchildren, or up to $35,000 (2025) can potentially be transferred to your child’s roth IRA to grow tax-free.

UTMA/UGMA Custodial Accounts

The Uniform Transfers to Minors Act (UTMA) and the Uniform Gifts to Minors Act (UGMA) accounts enable gifts to be made to a child while maintaining adult oversight.

How It Works:

• The account is opened and managed by an adult (custodian) until the child reaches the age of majority (18 or 21, depending on the state).
• At that point, control of the account transfers to the child outright.

Tax Implications:

• For 2025, the first $1,350 of unearned income is tax-free, the next $1,350 is taxed at the child’s rate, and the amounts above are taxed at the parent’s rate (the “kiddie tax”).
• No tax deferral; income and realized gains are taxed annually.

Advantages:

• Can be used for any purpose benefiting the child (not just education).
• Simpler and more flexible than a trust, but with less control once the child reaches adulthood.

Limitations:

• Assets count against financial aid eligibility.
• No tax-free growth like a 529 plan.

Comparing Canadian and U.S. Accounts

Feature	RESP (Canada)	In-Trust Account (Canada)	529 Plan (U.S.)	UTMA/UGMA (U.S.)
Tax-deferred growth	✅	Partial (gains only)	✅	❌ (annual taxation)
Government incentives	✅ CESG (up to $7,200)	❌	✅ (state-level)	❌
Control at age of majority	✅ if not withdrawn	❌	✅ remains owner-controlled	❌ (child takes control)
Use restriction	Education only	Any purpose	Qualified education only	Any purpose
Annual contribution limit	None (lifetime $50,000)	None	Varies by state ($350k+)	None
Impact on financial aid	Moderate	Moderate	Favorable	Unfavorable

Key Milestones for Financial Review After a Child Is Born

Having a child changes your financial landscape. Here’s a checklist of planning areas that deserve immediate attention:

Estate Planning

Update Wills and Beneficiaries:

• Ensure guardians are named for your child in your will.
• Update beneficiary designations on life insurance, RRSPs, IRAs, or 401(k)s.

Consider a Trust:

• Establishing a testamentary or living trust can help control when and how assets are distributed to your child in the event of your death.

Review Powers of Attorney:

• Ensure you and your partner have valid powers of attorney for property and health care.

Insurance Needs

Life Insurance:

• Essential for income replacement, paying off debts, and funding education.
• Term insurance offers affordable coverage aligned with child-rearing years.

Disability Insurance:

• Often overlooked but critical; your ability to earn income is one of your biggest assets.

Health and Critical Illness Insurance:

• Consider enhanced coverage, especially if relying on employer plans.
• In Canada, some families add private health insurance to cover gaps not included in provincial plans.

Child Life Insurance (Optional):

• Some parents purchase small policies for children that can later be converted to adult coverage regardless of health.

Childcare and New Expenses:

• From diapers to daycare, costs add up quickly. Update your monthly budget and track variable expenses.

Emergency Fund:

• Consider increasing your emergency savings buffer to cover 3–6+ months of expenses in case of job loss or health issues.

Saving for Multiple Goals:

• Prioritize retirement savings before overfunding education. Your child can take out student loans—your retirement can’t be borrowed.

Cross-Border Considerations for Dual Citizens or Moves

If one parent is a U.S. citizen living in Canada—or if a family moves between the two countries—planning gets more complex:

RESP and 529 Plan Compatibility:

• A U.S. person in Canada should be cautious with RESPs, as they may be considered foreign trusts by the IRS and trigger reporting (Forms 3520/3520-A).
• Similarly, 529 plans are not recognized in Canada and may not receive favorable tax treatment for Canadian residents.

Reporting Requirements:

• In-trust and custodial accounts can trigger foreign reporting (e.g., Form 114 FBAR, Form 8938) if held by U.S. citizens abroad.

Professional Advice Needed:

• Work with a cross-border financial advisor to determine the best mix of accounts and structures for your family’s unique situation.

Conclusion

Raising a child brings joy, responsibility, and a pressing need for financial foresight. Whether you live in Canada or the U.S., starting early with the right accounts—RESPs, 529s, in-trusts, or UTMAs—can pave the way for your child’s future.

But financial planning goes beyond just saving: updating your estate plan, insuring your income, and managing cash flow are equally important steps in building a secure future for your growing family.

At Cardinal Point Wealth Management, we specialize in cross-border and high-net-worth financial planning for families on both sides of the border. If you’re welcoming a new child and want to ensure every financial angle is covered, reach out to our team for a personalized consultation.

Imagine you’re a U.S. citizen or Green Card holder living in Canada, and you’ve just received the dreaded notice: your U.S.-based brokerage or custodian has decided they can no longer hold your taxable investment account or IRA because you live abroad. They’re giving you 60 days to transfer it elsewhere, or they will liquidate everything and provide you with a check.

Cue the panic—right?

No, just take a breath. Although this scenario is increasingly common, there are practical solutions. Here’s a breakdown of your options and considerations, compiled for you by Cardinal Point.

First, Why Is This Happening?

There are several reasons your U.S. financial institution no longer wants to hold your investment accounts:

1. Regulatory Landscape and the Foreign Account Tax Compliance Act (FATCA):Many U.S. financial institutions have been tightening restrictions on clients with foreign addresses due to risk management and compliance burdens such as FATCA. Maintaining accounts for U.S. persons abroad requires additional reporting, and many brokerages have simply chosen to avoid the complexity.
2. Securities Laws and Compliance Requirements: Both the financial institution and the investment advisor must have a securities license and be registered in the jurisdiction in which their client resides. Even if a client’s investment accounts are held in the U.S. at a U.S. financial institution, if that client resides in Canada, the firm holding or acting as a custodian for the account, as well as the individual or financial advisor rendering investment advice, must be registered in the Canadian Province where the client resides.  Unfortunately, most U.S.-based financial professionals are not registered to provide investment advice in Canada.
3. Tax Reporting Conforming to U.S. and Canadian Standards: While U.S. financial institutions generate annual tax documents and slips that conform to U.S. tax reporting standards, they do not provide the equivalent Canadian documentation needed for residents of Canada to file their Canadian taxes.

Solutions if You Have a Taxable (Non-Retirement) Investment Account

If your U.S. brokerage is closing your taxable brokerage account, your options include:

Transfer to Another U.S. Brokerage That Accepts Non-Residents

Some U.S. brokerages may still accept U.S. expats, though the list is shrinking. You’ll likely need:

• Proof of a valid Canadian mailing address in your name,
  • It is important that you report the address where you actually live, not an inaccurate location such as a relative’s address in the U.S. in an attempt to fool the authorities. State tax officials have caught on to that – and are catching people who use incorrect U.S. addresses. Then they send notices requiring that a state tax return be filed and state taxes be paid in full on investment income and realized gains earned in the account with the incorrect address.
• Proof of U.S. citizenship, and
• To speak directly to the U.S. brokerage and confirm that they do, indeed, still accept expat clients before initiating any transfers.

It is also possible to work with a qualified cross-border financial advisory firm, like Cardinal Point, which is dually licensed in both Canada and the U.S. as a registered investment advisor and specializes in holding U.S. taxable and qualified (retirement) accounts for U.S. expats. Cardinal Point has worked with U.S. custodians on this issue for more than12 years and has customized solutions for clients in this exact situation.  In addition to all other facets of financial and tax planning, Cardinal Point will take care of the account paperwork for you to continue holding your U.S. taxable investment accounts in the U.S. with full compliance.

Liquidate and Move the Funds to Canada

You could sell the holdings at the U.S. custodian and transfer the cash to a Canadian financial institution. However, this can potentially incur the following consequences:

• Capital gains tax in the U.S. (and potentially in Canada if you are already a Canadian tax resident),
• Currency exchange costs when converting from U.S. dollars to Canadian dollars, and
• Loss of tax deferral or growth potential.

Once the funds are in Canada, you can invest through a Canadian brokerage, but managing U.S. tax reporting becomes more complex, especially for mutual fund corporations considered PFICs (Passive Foreign Investment Companies), which can have punitive U.S. tax treatment and additional annual U.S. tax reporting.

Some investments, such as individual stocks and ETFs, can move in-kind (without immediate tax implications) from the U.S. custodian to a Canadian custodian. However, this can be very difficult to accomplish on your own, as it is uncommon and requires extensive coordination with both U.S. and Canadian custodians. Once they are moved, it also necessitates adjustments to the U.S. and Canadian dollar cost basis for that move plus all future transactions. Luckily, solving these problems for clients is what a cross-border financial advisory firm such as Cardinal Point specializes in, in addition to all other aspects of cross-border investment, financial, tax, insurance, and estate planning.

Solutions if you Have an IRA (Traditional or Roth)

Many U.S. custodians will not allow IRAs to be held by non-U.S. residents. Your options include:

Find a U.S. Custodian That Allows IRAs for Non-Residents

This is the cleanest option, but not all custodians will help.

Do NOT attempt to directly transfer an IRA to a Canadian RRSP – direct transfers are not allowed, and trigger a full distribution and adverse tax implications. An indirect transfer is allowed, however, and can be beneficial under certain circumstances after modeling out the U.S. and Canadian tax implications with a cross-border tax advisor. 

Take a Distribution (Not Ideal)

If no U.S. custodian will take your IRA, your current custodian may force a distribution, resulting in:

• Possible tax payable in the U.S.: Traditional IRA distributions are taxable; Roth IRAs are tax-free only if qualified,
• Possible 10% early withdrawal penalty if you’re under age 59½, and
• Possible tax payable in Canada: Depending on the type of IRA, whether or not you’re a Canadian tax resident, and whether or not you properly elected tax-free treatment for a Roth IRA with the Canada Revenue Agency, the withdrawal may also be taxable in Canada. The U.S.-Canada Tax Treaty can provide assistance to avoid double taxation, but you will pay the higher Canadian tax rate on the taxable distribution.

Work with a Cross-Border Financial Advisory Firm

Cardinal Point can continue holding your Traditional and Roth IRAs at a U.S. custodian.  Cardinal Point has worked with U.S. custodians on this issue for more than12 years and has created solutions that are customized for clients in this exact situation. Cardinal Point will take care of the account paperwork for you to properly continue holding your U.S. IRA(s) in the U.S. and will provide tax/financial/estate planning on future distributions from these IRAs to ensure you are paying the minimum required amount of tax and passing the maximum amount to your beneficiaries as possible.

What Can You Do Now?

1. Act Quickly – 60 days isn’t much time. Start calling alternative custodians or reach out to a cross-border financial advisory firm, like Cardinal Point, ASAP.
2. Get Professional Help – This is a tax and legal minefield. A cross-border planning firm such as Cardinal Point, can save you time, money, stress, and regret.
3. Don’t Leave Funds in Limbo – If your account is liquidated and you don’t transfer the assets, the custodian may send you a check, potentially triggering costly taxable events or complications with your Canadian bank.
4. Avoid PFIC Traps in Canada – If you move your investments to a Canadian brokerage, be mindful of Canadian mutual fund corporations that may be taxed harshly under U.S. rules.

Final Thoughts

The problem outlined above is frustrating, but certainly not insurmountable. The key is to be proactive and choose custodians and strategies that align with your cross-border status. The worst thing you can do is to ignore the notice from your U.S. brokerage or assume it’s not urgent.

Need help figuring out your next step? Consult a cross-border financial planning firm, like Cardinal Point, for experienced, qualified guidance to successfully navigate the ins and outs of U.S.-Canada investing.