Crossing Borders and Maximizing Investments: Navigating Your Finances

Written by Dean Moro BComm, CIM®, Associate Portfolio Manager, & Carson Hamill CIM®, CRPC®, Associate Financial Advisor, Assistant Branch Manager

Whether it be lifestyle choices, remote work opportunities, or recent developments in the workplace, more and more Canadians are returning home to Canada after years of working and living in the United States. In this blog, we’ll highlight the top issues you will need to navigate when it comes to your investments and cross-border planning.

• U.S. Taxable Investment Accounts
• 401(k)s
• IRAs and Roth IRAs
• ESOPs and RSUs
• FBAR Reporting
• PFIC

U.S. Taxable Investment Accounts

Canadian residents are obligated to disclose their foreign financial assets to the Canada Revenue Agency (CRA). Consequently, individuals possessing a taxable investment account in the United States must report it annually to the CRA on Form T1135. However, the reporting and accounting procedures for these investments can be arduous and costly, if they are maintained with a U.S. brokerage firm.

By partnering with a dual-licensed Canadian financial advisor, individuals can streamline the complex reporting requirements associated with their U.S. investment accounts.

To learn more about these issues and how we can assist you, click here.

401(k)s

Considering a 401(k) rollover to an IRA? Rolling over a 401(k) to an IRA addresses issues related to reporting, investment options, and account freezing, while offering benefits such as simplified financial planning, increased investment control, improved estate planning, active investment management, and streamlined administration. It is crucial to consult with professionals and consider individual circumstances before making any decisions regarding a rollover.

To learn more about this process and the potential benefits of a 401(k) rollover, click here.

IRAs and Roth IRAs

After returning to Canada, you may find yourself wondering about the next steps for your U.S. retirement accounts. Raymond James Canada and Snowbirds Wealth Management provide a unique solution.

Engaging a dual-licensed Raymond James financial advisor, who holds licenses in both Canada and the U.S., allows you to keep your U.S. retirement accounts in the U.S. while having them managed by your Canadian advisor. This arrangement can help you avoid the pressure to convert or collapse these accounts, which may not be in your best interest.

By working with the right brokerage firm and advisor, you can potentially mitigate a significant tax liability. This approach allows for a more seamless management of your cross-border retirement investments, ensuring that your financial interests are prioritized and protected.

For further information about the issues that can arise for Canadian residents with U.S. retirement accounts, read more here.

To learn about the unique solution Raymond James Canada and Snowbirds Wealth Management provide, click here.

ESOPs and RSUs

RSUs (Restricted Stock Units) and ESOPs (Employee Stock Ownership Plans) are commonly used as incentives to motivate and reward employees in various ways.Cross-border tax issues can arise with ESOPs and RSUs when employees have tax obligations in multiple jurisdictions.

Key considerations include residency rules for taxing ESOPs and RSUs, the risk of double taxation, and the need for compliance with withholding and reporting obligations. Tax treaties can provide relief through foreign tax credits or exemptions. Exchange control regulations and adherence to local laws add further complexity. Companies must ensure compliance with laws regarding employee benefits, securities, taxation, and governance.

To read more about the cross-border issues associated with ESOPs, click here.

For information about RSUs, click here.

FBAR Reporting

If you are a U.S. person, it is mandatory for you to annually file an electronic report known as the FinCEN Form 114, or FBAR (Report of Foreign Bank and Financial Accounts), if you possess financial assets (such as investments, pensions, bank accounts, etc.) located outside of the United States. Failing to report this information can lead to significant penalties.

To learn more about FBAR reporting, and how working with an experienced dual-licensed cross-border financial advisor can benefit you, click here.

PFIC

Are you familiar with PFIC U.S. tax rules and how they can affect you? If you are a U.S. citizen or green card holder living in Canada, it is important to be informed about the rules surrounding passive foreign investment companies (PFICs) and the potential tax obligations that may arise from owning them.

PFICs are subject to harsh tax regulations by the IRS and often, investors are not aware they have exposure to PFICs. Potential penalties include excessive taxation, interest charges, and penalties for failing to file the required annual information form known as Form 8621.

To learn how you can avoid issues associated with PFIC, click here.

Summary

Returning home to Canada and managing your investments can indeed present a range of complex issues. Therefore, it is crucial to seek the guidance of a dual-licensed cross-border financial advisor and cross-border tax professional.

Partnering with an experienced cross-border financial advisor can provide peace of mind by helping you avoid potential pitfalls and costly mistakes. They have in-depth knowledge and experience in dealing with cross-border investment issues, such as managing retirement accounts, handling foreign assets, and understanding the implications of currency exchange rates. They can help you understand the rules surrounding various investment vehicles and make informed decisions that align with your financial goals.

Next Steps

If you are planning on moving to Canada and need assistance with your investments, estate planning, and portfolio management, please call or email us at Snowbirds Wealth Management, as we specialize in cross-border financial planning and wealth management. We work closely with experienced cross-border lawyers and accountants to ensure you have a team behind you.

About Snowbirds Wealth Management

Gerry Scott is a portfolio manager and founder of Snowbirds Wealth Management, an advisory firm focussed on the cross-border market. Together with Dean Moro and Carson Hamill, associate financial advisors with Snowbirds Wealth Management, they provide investment solutions for Americans living in Canada, and Canadians residing in the United States. Licensed in both Canada and the U.S., they provide tailored investment solutions to minimize the tax burden when moving assets across borders.

To schedule an introductory call, please click here.

Statistics and factual data and other information are from sources RJLU believes to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities nor is it meant to replace legal, accounting, taxation or other professional advice. We are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. The information is furnished on the basis and understanding that RJLU is to be under no liability whatsoever in respect thereof.

Raymond James (USA) Ltd. advisors may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Investors outside the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Raymond James (USA) Ltd. is a member of FINRA/SIPC.