Question

Hi Phil

I got your contact info from my long-term lawyer XXXX XXXXX. He will be helping with my estate matters but I also have a bunch of US based issues, estate planning and investments that I need help with. Not to mention a rather large US inheritance that I am anticipating receiving shortly.

Here is breakdown of my situation. If you think you can help please let me know how to proceed with your services.

• I moved up to Canada 10 years ago to retire with my wife. I’m a dual citizen and my wife has her US citizenship and Canadian PR.
• Our assets are split between the US and Canada
  • Canadian assets include RRSPs, some rental properties, regular investment accounts, bank accounts and some relatively small amounts of Bitcoin
  • US assets include traditional IRA, University pension ($95,000 a year), investment account, Hawaii property (rented for half the year) and my eventual inheritance

At this point there’s so much going on that I really don’t know where to start. I need to develop a solid estate plan to properly plan for my income into retirement. The plan also needs to include my future inheritance and our eventual beneficiaries.

As mentioned above I’ll be receiving a sizable inheritance in the next few years from my mother in the US. My mother is not well and will likely pass soon. We have tried to simplify her estate and her only remaining assets are $5M to $6M in regular public investments and a house in Texas worth around $400,000. Half of this inheritance will be coming to me and the other half to my sister that lives in the US. My sister is the executor of the estate and I fully trust her to handle the estate for the family.

I also have 2 grown children both living in Canada and 1 grandson. I would like to setup an education plan for my grandson along with some pre-estate planning for my 2 children. Once again not sure where to start here considering I have both Canadian and US issues to address with the estate.

I’m not sure if you’re taking on new tax clients but I’m also ready to switch from my current 2 tax accountants. I have someone doing my Canadian taxes and someone in the US doing my US taxes. It seems to take forever each year (all the way to October 15th) and it would be nice to find a firm that can do both tax returns in house. It would be really nice to start simplifying our tax and financial situation.

Thank you for taking time to read this email and I look forward to hearing from you soon.

Sincerely,

XXXXX XXXXXX

Answer

Hi XXXXX

Thank you for the email. You certainly have lot of items listed below but I’ll do my best to provide some general insights on your situations in this email. That being said given the multitude of issues to review we should really book a time for a proper consult.

In most cases, especially if you want to simplify your financial matters it makes sense to start consolidating accounts and moving what you can to Canada. That way one advisor can take a look at the full picture to properly assess and advise in real time.

Also, it’s almost always more efficient to file both the Canadian and US income tax return together. Also, considering you have a US pension and a rental property it’s odd that the Canadian return was actually filed well before the US return as you would have needed to know how much US tax you paid for purposes of the Canadian foreign tax credits. For both the US pension and the Hawaii rental property.

Before tackling the tax planning on the accounts above I would likely suggest performing a cashflow projection for you and your wife into retirement. This will give you a good understanding of your cashflow requirements based on current and future assets. Once this is fully developed we can then review the plan for gifting of assets to your family and possibly probate and US estate tax planning.

Some of the planning will likely include from which account would we want to pull from first with respect to required cashflow. For example, upon death of the last remaining spouse accounts such as the RRSP/RRIF will be included in income on the final return. The IRA however can be distributed to your beneficiaries and will continue to be deferred from taxation for the next 10 years (other than the required minimum distributions). Therefore, all things being equal, you might want to draw down on your RRIF first before pulling from the IRA. That being said this is only an example and you’ll want to review everything together in one cohesive plan as some items such as income splitting will need to be reviewed.

We’re also seeing lots of clients help fund education plans for their grandchildren. In most cases it can be tough for Americans to setup RESP plans given the compliance and tax challenges on the US side, however if you have family members that are no US people there could be some advantages to setting up and RESP, especially if the family has not taken into advantage of Canadian RESP grants.

Once again, we’ll want to book a comprehensive estate planning consultation to assess all of these items together, but some other issues to note might be:

• You’re likely already doing T1135 filings, however once you receive the inheritance from the US you’ll want to plan to have the assets transferred to Canada ASAP. This won’t be such a rush if the accounts are liquidated to cash, however if they are still in active investments the T1135 filings could get very onerous.
• US estate tax planning may be required, however given how high the estate tax exemption is currently and the fact that you’ll both have unlimited spousal estate tax credits there may not be anything urgent to review.

Once again, I would recommend working through the retirement cashlow analysis first then circle back around to estate and tax planning.

Hope that helps and please let me know if you want to setup a consult.

Cheers

Phil