Cardinal Point Wealth Management

Your Cross-Border Financial Advisor

Contact Us | Client Login
  • About Us
    • Our Story
    • Our Team
    • Our Clients
    • Legal and Compliance
    • Part 3 Form CRS
    • Relationship Disclosure Information
  • What We Do
    • Investment Management
    • Wealth Planning
    • Tax Planning and Preparation
    • Private Wealth Services-U.S.
    • Private Wealth Services-Canada
    • Cross Border Wealth Management, Financial and Tax Planning Advisor
    • Business Management for Athletes
  • Cross-Border Services
    • Cross Border Wealth Management, Financial and Tax Planning Advisor
    • U.S. citizens living in Canada
    • Moving to Canada from the U.S.
    • Canadians Living in the U.S.
    • Moving to the U.S. from Canada
    • Expatriates Living Abroad
  • Blog
  • About Us
    • Our Story
    • Our Team
    • Our Clients
    • Legal and Compliance
    • Part 3 Form CRS
    • Relationship Disclosure Information
  • What We Do
    • Investment Management
    • Wealth Planning
    • Tax Planning and Preparation
    • Private Wealth Services-U.S.
    • Private Wealth Services-Canada
    • Cross Border Wealth Management, Financial and Tax Planning Advisor
    • Business Management for Athletes
  • Cross-Border Services
    • Cross Border Wealth Management, Financial and Tax Planning Advisor
    • U.S. citizens living in Canada
    • Moving to Canada from the U.S.
    • Canadians Living in the U.S.
    • Moving to the U.S. from Canada
    • Expatriates Living Abroad
  • Blog

Cross Border Transition Planning – RESPs

January 16, 2019 By Cardinal Point Wealth

“How do I move my financial life to another country?” It’s a question we hear from many clients as they begin making a cross-border transition. When you are making the move to the U.S., you want to transition your finances smoothly and seamlessly while saving time, headaches, and every dollar you possibly can.

Much like financial planning, transition planning is a process and not a transaction or an end in itself. And like financial planning, the most effective transition planning hinges on a clear understanding of what you want to achieve in terms of lifestyle both now and in the future.

One of our key roles as cross-border financial planners is to learn where you are trying to go (your goals and objectives) and then design a detailed plan to test the viability of your goals/objectives and ultimately get you to your destination. After all, without a flight plan, how can you know which direction to go?

One important area that should be considered when making a move across the border is education planning.  As a family you may have started a savings plan for you or your children’s education.  Registered Education Savings Plans (RESPs) are a popular savings vehicle in Canada for this goal due to available government grants, bonds and tax savings.  How are these accounts treated when one or both of the parties involved becomes a U.S. resident for tax purposes?

Subscriber (Owner) – The tax-sheltered status of an RESP only applies to Canadian tax residents.   With a move to the United States, income and capital gains within the account will now be reportable and taxable on the subscriber’s U.S. return.

IRS Tax Reporting – RESP accounts require annual disclosure on the subscriber’s U.S. tax return by one of two methods. The first is a school of thought that these are foreign trusts that require reporting on IRS forms 3520 and 3520-A, with income reported annually. The second method is to report the income annually on an IRS Schedule D and include a statement in the return indicating that the account is treated as a taxable brokerage account instead of a foreign trust.  Additional reporting may be required for the investments within the account. If you have already moved to the U.S. and filed a tax return, check with your accounting professional before deciding which of these options to use or before making any changes to your reporting.

It is possible to change the subscriber on an account to someone who is not impacted by these reporting requirements, but other factors relating to the Beneficiary and your contributions also need to be considered.

When a Beneficiary becomes a non-resident of Canada, contributions to the RESP are no longer allowed and the beneficiary is no longer eligible for government incentives.  If Canadian residency is re-established in the future, contributions can resume, and grants will again be paid, but the period the beneficiary was a non-resident does not qualify for accumulated grants.

Educational Assistance Payments (EAPs) are based on enrollment in qualified post-secondary studies or a specified educational program and

are comprised of earnings and any government incentives (grants, bonds).  A beneficiary must be a resident of Canada in order to receive the government incentive portion as part of the EAP, however, a non-resident can receive income earned within the account. An EAP may also be paid up to six-months after ceasing enrollment.   Thus beneficiaries qualify, in part, whether they remain a resident of Canada or become a tax resident of the United States.  When an EAP is made, The RESP promoter will issue a tax slip to the beneficiary, and the beneficiary will claim this on their personal tax return for the year of receipt.

If the beneficiary has completed their education, it may be possible to replace the beneficiary with one who can use the EAP government payments or investment earnings; however, if this is not an option the subscriber may need to close the account.

When an RESP is closed, the subscriber’s contributions can be withdrawn tax-free.  All grants and bonds remaining within the account must be returned to the government.  However, earnings can only be withdrawn (known as an Accumulated Income Payment, or AIP) if the account has been open for 10 years, the beneficiaries are at least 21 and not attending post-secondary education, AND, here’s the glitch, the subscriber is a resident of Canada.

If the RESP must be closed and the conditions for an AIP are not met, the remaining earnings in the account will be paid to a designated educational institution in Canada of your choosing.

If you are contemplating a move to the U.S. and have an RESP that has been open for greater than 10 years and beneficiaries that are over age 21, there are other options that may be available while you are still a tax resident of Canada.

The decision whether to keep your RESP open or close the account is as unique as your personal circumstances.  The knowledge and expertise of a cross-border planning professional can help you to determine what solution will work best for both the subscriber and beneficiary of the plan.  Please reach out to Cardinal Point to discuss how we can help you to make the choice that makes the most sense for you.

Filed Under: Articles Tagged With: Cross-Border Estate Planning, Cross-Border Transition Planning, resp

9 Essential Elements of Cross-Border Transition Planning

May 22, 2014 By Cardinal Point Wealth

united-states-canada-flags“How do I move my financial life to another country?” It’s a question we hear from many clients as they begin making a cross-border transition. Whether you are making the move to the U.S. or Canada, you want to transition your finances smoothly and seamlessly while saving time, headaches, and every dollar you possibly can.

Much like financial planning, transition planning is a process and not a transaction or an end in itself. And like financial planning, the most effective transition planning hinges on a clear understanding of what you want to achieve in terms of lifestyle both now and in the future.

One of our key roles as cross-border financial planners is to learn where you are trying to go (aka, your goals and objectives) and then design a detailed plan to test the viability of your goals/objectives and ultimately get you to your destination. After all, without a flight plan, how can you know which direction to go?

Our firm’s Canada-U.S. transition planning focuses on 9 key areas that should be considered when making a move across the border:

  1. Customs Planning: This element addresses the process of relocating your assets to Canada or the U.S. Transporting belongings such as cars, pets, guns or other valuables across the border brings up specific issues that need to be sorted out ahead of any move.
  2. Immigration Planning: Whether it’s temporary or permanent, moving to and living and working in Canada/U.S. has legal ramifications. Immigration planning covers all the legal means of crossing the border.
  3. Cash Management Planning: This area includes the development and analysis of your net worth statement and an assessment of your cash inflow/outflow during your move. Our team can look at the ownership of your assets (whether between spouses or between the U.S. and Canada) and calculate a variety of financial ratios to see what challenges or opportunities arise. Your net worth statement is a benchmark from which we can analyze the impact of your move over time. We can also focus on the cross-border transition of cash and offer strategies to simplify your financial life before your move. This includes developing a prudent, purposeful and ongoing approach to currency conversion and foreign exchange.
  4. Income Tax Planning: When making a cross-border move, a comprehensive review of your current and prospective tax situation is crucial as it can reveal strategies to reduce your tax liability before and after your move. Effective tax planning reviews various techniques that may apply to your situation—including tax planning strategies that are state and province specific—all with the aim of curbing your tax liability.
  5. Independence Planning: Will you have enough money to sustain your retirement lifestyle through the decades? Independence planning uses current assets, income, and expenses to create detailed projections that help determine the long-term achievability of your financial and lifestyle objectives. Such analysis can provide valuable insights into which actions, if any, may be needed to attain your goals.
  6. Education Planning: This element looks toward the future to determine: how much is required, at what point in time, and what you need to do to fulfill future education goals. This planning can also include a review of your cross-border education savings options and what to do before a move.
  7. Risk Management: Catastrophic events such as fire, theft, illness, disability or death could devastate what has taken a lifetime to build. Risk management looks at your current exposure for risk and determines the most prudent course of action to address such risk. There are numerous differences in the way risk is managed in the U.S. and Canada. When making a cross-border move, it is vital to ensure you will be fully covered.
  8. Estate Planning: Estate planning assists in establishing order to your affairs so that you can: 1. continue to control your property while alive, 2. provide for the needs of loved ones should you become disabled, and 3. leave what you have to whomever you want, in the way that you want, and at the lowest overall cost.
  9. Investment Planning: This area focuses the investment objectives you established in your financial plan and then develops an investment portfolio to achieve your desired rate of return while also managing for tax liability. An essential part of the transition planning process is developing a properly structured and integrated investment strategy that includes your investment accounts on both sides of the border.

Are you ready to begin the transition planning process? Whatever your goals and needs are, the experts at Cardinal Point Wealth Management can help ensure a smooth road to your cross-border destination.

Terry Ritchie is the Director of Cross-Border Wealth Services at the Cardinal Point, a cross-border wealth management organization with offices in the United States and Canada.  Terry has been providing Canada-U.S. cross-border financial, investment, tax, transition, and estate planning services to affluent families for over 25 years.  He is active as an author, speaker and educator on international tax and financial planning matters. www.cardinalpointwealth.com

Filed Under: Articles, Canada-U.S. Financial Planning Articles, Cross-Border Estate Planning Articles, Cross-border Tax Planning, Featured, Immigration, Investment Management Articles Tagged With: Canada-U.S. financial planning, Cross-Border Estate Planning, Cross-border tax planning, Cross-Border Transition Planning, Immigration, Investment Management

Articles You Might Like

Dual Canada U.S. citizenship

Dual Tax Residency in a Canadian Context

Estate Planning letter

Communicating Your Estate Plan is a Vital Part of “The Estate Plan”

Gardener Contractor or Employee

Nannies, Housekeepers and Gardeners: U.S. Taxpayer Implications for Household Workers

Discuss your goals with us today
Canada US Investment Management Goals
We can handle all of your Canada-U.S. investment management, tax, estate and financial planning complications
Wealth management strategies fit for you
Cross-Border Financial Management assessment
Our cross-border financial planning team can provide an assessment of your needs based on your unique circumstances

How We Help

  • Cross-Border Financial & Tax Planning
  • Americans Living in Canada
  • Canadians Living in the U.S.
  • Moving to Canada from the U.S.
  • Moving to the U.S. from Canada
  • Expatriates Living Abroad

What We Do

  • Investment Management
  • Wealth Planning
  • Tax Planning & Preparation
  • Private Wealth Services for U.S. Residents
  • Private Wealth Services for Canadian Residents
  • Cross-Border Financial & Tax Planning
  • Business Management for Athletes

Resources

  • Canadians in California
  • Canadians in Texas
  • Canadians in Florida
  • Canadians in Arizona
  • Canadian and U.S. Expat Tax Planning
  • Wealth Management for U.S. Citizens in Canada
  • Calgary Financial Planner
  • Custodian Closed Your Cross-Border Investment Account?

Videos & Social Media

  • Americans in Canada: Investment Basics
  • Americans Selling Canadian Homes Face Tax Issues
  • Does it make financial sense to renounce your U.S. citizenship?
    BrightScope Cardinal Point Twitter Cardinal Point Google Plus Cardinal Point Facebook Cardinal Point LinkedIn Cardinal Point
Copyright © 2023 Cardinal Point Capital Management, ULC. All Rights Reserved.

“Cardinal Point” is the brand under which dedicated professionals within Cardinal Point Capital Management, ULC provide financial, tax and investment advisory, risk management, financial planning and tax services to selected clients. Cardinal Point Capital Management, ULC is a US registered investment advisor and a registered portfolio manager in Canada (ON, QC, MB, SK, NS, NB, AB, BC). Advisory services are only offered to clients or prospective clients where Cardinal Point and its representatives are properly registered or exempt from registration. This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital.