Martin Pelletier: Retirement savings, life insurance, investment trading restrictions are just a few of the things to address to avoid unwelcome and costly surprises

Given the bone-chilling temperatures in Alberta last week, heading to the southern United States for a holiday or even for the whole winter doesn’t sound like a bad idea.
Some Canadians, however, make a more permanent move south, in search of benefits such as more attractive employment or business opportunities or potentially lower tax rates, depending on the state to which one relocated.
If you happen to be one of those seriously considering making such a move, it may not feel like much of a cultural shift from Canada, but failing to be properly prepared can result in some unwelcome and costly surprises.
Seeking expert advice from cross-border specialists in tax, estate planning and wealth management can often be a great solution.
To help, here is a summary of some of the more major items to review with your team of advisors before heading south.
You will first need to determine whether or not you are planning to sever your tax ties to Canada and the associated consequences. This includes your existing residence and/or other real estate and what happens if you don’t sell before you leave. There could also be tax consequences if you decide to maintain your Canadian life insurance policies and the potential for double taxation if you are a shareholder of a private company or beneficiary of a trust.
In regards to your investments, trading restrictions could apply on your existing accounts if you aren’t careful so make sure your current advisor is qualified to manage your portfolio cross-border. While registered accounts such as RESPs, TFSAs and RDSPs, are not tax-free in the U.S., there are planning options available.
The rules around RRSPs can be a bit complicated as the Canada-U.S. tax treaty does allow an annual election to defer tax on income earned within a plan, but this may not apply depending on which state you’re moving to (California for example does not provide relief).
That said, there are some very effective strategies worth exploring before your departure such as a top-up and/or rebalancing.
If your relocation is coming in the short to mid-term, you may want to review the benefits of making contributions to CPP vs. Social Security. Participation in a stock option or other incentive plans also have some tax differences between the two countries to be aware of. In addition, be sure to update your estate documents in the event of receiving an inheritance from Canada while in the U.S.
For those looking at a more permanent solution such as applying for a green card, it’s especially important to understand the long-term impacts should you plan on retiring back in Canada. This is because the U.S. taxes its citizens on a worldwide basis, even if they move abroad and never return.
Finally, the Canadian government will charge a disposition tax on accrued gains on many of your assets including some of your investments. So it’s good to know the rules around departure tax such as the amount, potential deferment and posted security.
All of this may feel overwhelming, but it doesn’t have to be with some proper planning and advice.
Martin Pelletier, CFA is a Portfolio Manager and OCIO at TriVest Wealth Counsel Ltd, a Calgary-based private client and institutional investment firm specializing in discretionary risk-managed portfolios as well as investment audit and oversight services.