By Miles Clyne
Canadian and American citizens’ work and move across their borders for many personal and professional reasons. Investment and tax planning take a few twists when individuals have investments in one country and then move between these countries. Relocating without proper planning can result in higher taxation, poor estate planning and other financial challenges.
Prior to a move, it is important to recognize that significant differences exist between Canada and the U.S. when it comes to financial matters. Individuals who are dealing with or expect to be dealing with cross-border requirements should review their situation with experts.
It can be difficult to locate an advisor who is legally licensed or authorized to provide financial advice and services on both sides of the border. Few firms comply with applicable regulations or have the appropriate structure. The majority of US and Canadian advisors are solely authorized to provide advice on their soil.
A common failure when someone moves across the border is that the current advisor cannot continue to manage some or all of the investments. Investors run a risk from single-country investment advisors: in order for advisors to retain the clients’ accounts, they may unwittingly make recommendations that trigger substantial tax liabilities for their clients. If an investor tries to work with advisors in each country, there is a substantial risk that neither advisor comprehends the taxable impact of their investment approach in the context of a cross-border tax strategy.
What A Dually Licensed Advisor Does Differently
An advisor holding a dual license that has access to an advisory team that is well versed in the Canada-U.S. tax treaty is paramount to successfully maintaining an efficient tax and investment strategy. The Canadian and U.S. tax systems operate under unique mandates. If these mandates are not understood, double taxation could occur. The Canada-U.S. tax treaty is the tool that can mitigate double taxation. Canada and the U.S. exchange citizen and resident tax information. This allows both governments to have the access to information necessary to identify fair treatment to citizens of both countries, and potentially identify unintended tax evasion.
Cross-border estate planning is subject to frequent change. The estate planning laws in Canadian provinces and in U.S. states are not uniform. Tax ramifications and financial objectives should be considered when constructing a cross-border financial and estate plan. It is important to partner with a qualified team of tax, legal and investment professionals who specialize in Canadian and United States cross-border transitioning and asset management to get the best outcome.
At the Tycuda Group we recognize how critical proper advice is. We are dually licensed portfolio managers in both Canada and the US. We insist on knowing the tax and other consequences of any actions our clients are considering before we make any formal recommendation. We have relationships with cross boarder accountants and lawyers that we can draw upon for advice and refer our clients to if needed.
So often it is not what you make, but what you don’t lose that rules the day. Get the right advice, it’s critical.