Moving to BC, what to do with investments and pending retirement?

07 September 23
Cross Border Tax

Question

Hi Phil, we are members of your Americans in Canada Facebook page and will be moving to Victoria BC in the next few months.

I’m having a hard time getting a clear answer on our situation and wondering if you can help us. If there is a charge for a consultation please let me know how we can pay.

Here is our situation in general terms:

  • My wife and I are dual citizens that moved to California in 2007 and are now planning for our return to Canada
  • We are considering moving back to Vancouver Island (where my wife has family) or Ottawa depending on the state of the real estate market and my own business prospects
  • I’ll be doing some part-time consulting (through my existing LLC), but for the most part we will be transitioning to retirement
  • We have fairly significant investment and retirement account that will need to be planned for, including IRA, ROTH IRA, regular investment account, small company pension (my wife), proceeds from house

Honestly, I likely don’t even know what questions to ask and whether this is a simple or complex situation.

Any thoughts?

Answer

Hi XXXX

Thanks for the email. Considering you have quite a bit going on here it’s likely worth jumping on a zoom call to chat, however I’ll do my best to give you some guidance in this email:

  • For tax purposes it won’t matter much which province you land in. Most provincial rates are not materially different unless you’re in the highest tax bracket. Quebec would be the exception.
  • If you’ll be continuing with consultation, especially if it will only be temporary, I would suggest simply operating as a sole proprietorship. Incorporation would be terribly expensive to organize on the Canadian side. I would also suggest winding up the LLC (assuming no adverse US consequences) as the LLC will be very tax inefficient for Canadian purposes. We can discuss more about this on our call.
    • Traditional IRA – This can stay in-tact and should be managed by a Canadian cross-border investments advisor (I can help with this)
    • ROTH IRA – depending on your income for the year, there may be an opportunity to convert some of the existing trad IRA to the ROTH. Once in Canada you’ll want to ensure you file a proper ROTH IRA treaty election with the Canada revenue agency.
    • Regular investment accounts – they can be a little tricky as we normally like to plan for these well before the move. In short, the adjusted cost basis of your investments will be adjusted to the fair market value on the day you move to Canada. This results in no future Canadian tax on any accrued gains in the portfolio after you enter Canada. We will want to review the accounts as planning for loss positions and other items is important before actually making the move.The investment accounts will need to be reviewed separately as they all have different tax characteristics.

As you can see from the list above there’s lots of planning to review for the investment and tax items discussed above. Let’s setup a time to chat about the move.

Hope that helps.

Phil

phil@philhogan.com

Phil Hogan, CPA, CA, CPA (Colorado)

Phil Hogan is a Canadian and US CPA working with clients throughout Canada and the US. Phil advises on cross border tax and financial planning matters. Phil can be reached at phil@beaconhillwm.ca or via telephone at 250-661-9417. You can also read more about Phil at www.Beaconhillwm.ca/team/about-phil/

This commentary reflects the personal opinions, viewpoints and analyses of the Beacon Hill Wealth Management Ltd. partner providing such comments, and should not be regarded as a description of advisory services provided by Beacon Hill Wealth Management Ltd. or performance returns of any Beacon Hill Wealth Management Ltd. client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Beacon Hill Wealth Management Ltd. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. Any discussion about taxation is for educational purposes only and should not be viewed as professional advice. Consult your tax professional for tax advice on your particular situation.

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