RRIFs, etc - Remember this!

[oyster]

We live in the US; it was no problem to move since we are dual, with both passports. We keep a place in the Maritimes and go back during the hot months (retired older couple). But for the many Canadians in our position, bear this in mind: when you change your permanent address from your Canadian address, your RRIFs and LIFs are frozen in place. That is, if you have the money invested in funds or securities, your Canadian broker will only continue the arrangements you had in place with them when you left Canada. You will not be able to exit a fund or join/add another fund, and the money you withdraw can be sent only to the Canadian bank and account on file with your broker. The amount of money withdrawn from your Canadian accounts and deposited in your Canadian bank account will now reflect a withholding tax ranging from 15% to 25%. You may withdraw lump sums, but these will *probably* reflect the higher rate rather than the lower.

There are exceptions. If your broker/fund company is "registered" in the state in which you have your residence, you may trade *among their offerings* as if you were in Canada. Ours is "registered" in New Jersey, for example, but not New York. Any questions?

[Starttofinish]

If the company your broker works for is a international.do the same rules apply?
thinking of companies like AIG, etc.
Why can't you move the money to a bank account that is compatible with being withdrawn for use in the US?
I am happy to admit I am totally clueless here, so direction would be great!

[oyster]

We're going up to Nova Scotia in 10 days or so, and one of the fiscal chores I've set myself is to question my bank (TD) about moving my $CDN to Waterhouse, which TD owns. I don't expect much, frankly, since W'house would not let me continue in my American account when TD acquired the brokerage some years ago. They insisted I move to CANADIAN Waterhouse, which was two or three times more expensive, and bush-league besides. But we'll see.

If this is confusing, mark it up to the absence of any national oversight in Canada. Quebec's determination to put its own institutions in place means Canada can have no national equivalent to the SEC; thus brokers/fund operators work under provincial supervision, which is laughable and ultimately means the fund/investment companies run the show in their own interest. And it has proved to be in their interest to restrict severely your ability to move your money around when you move stateside. Nevertheless, there are always ways, however devious or inconvenient. They have to let you withdraw, for example, and the maximum withholding is 24%. Depending on your circumstances, and given the wonderful appreciation of the Canadian dollar these last couple of years, it might be wise to open an account with the highly reputable online Everbank. They make it easy to open a Canadian dollar account in their forex division; They'll buy US dollars with it more cheaply than any other forex dealer I know of, and deposit the money in your Everbank chequing (checking) account. Couldn't be more convenient or safe. But do be aware that the Americans are growing restive with their cheap dollar and the consequent inflation of energy prices, so the Canadian dollar will likely decline in relation to the American. However, Ottawa will now let you buy as many US securities as you wish, so it's easy to hedge.

[Steven]

Yes, this is another thing (the other one being departure tax) that Canada IMO uses to stop people from leaving the country.

I've never used an RRSP for exactly these reasons. The new TFSA makes more sense.

Most countries have a way out of your savings tax shelter without penalties, but Canada does not.

For example in the UK you can dissolve an ISA at any point and there is no capital gains liable on it. But with an RRSP for example, if you dissolve it prior to the age of 65, you have to pay income tax on it because of the way they're structured.

I haven't actually bothered to look into the US end of it in detail, but the US doesn't recognise an RRSP and other Canadian tax shelters at all, so in fact if the IRS becomes aware of it, I have a feeling you're looking at US capital gains tax as well.

Stuff I've read on the internet says simply to leave it alone and not to put anymore money into it, which seems to be a "don't ask, don't tell" strategy but I'm not sure even that is technically legal.

And of course you also get hit with Part XIII non-resident tax as well on the Canadian end, which is another lovely thing the Canadian govt. does to try and stop you from leaving - in reality it just discourages foreign investment.

If you've got a tory MP it's definitely worth writing them a letter about these things, they have introduced more exemptions to the Part XIII tax and they have come up with the new Tax Free Savings Account, so they're aware of the problem, but really the departure tax needs to be abolished.

[voyager6868]

I think there's a form you can fill out each year and submit with your US taxes that tells them about your RRSP. I'm pretty sure that if you do this and then do just "leave it" from the day you enter the US, then there are no US tax implications on it. I can't recall the number on the form off-hand though.

[flames9]

FORM 8891 to notify the IRS about ur RRSP's Easy form to fill out.

[Steven]

Yeah, okay you can keep them under a clause in the US-Canada tax treaty but you can no longer contribute to them from the looks of it. Worth bearing in mind, especially if you're moving somewhere other than the US as they may not have an equivalent provision.

Yet another form to remember to fill out if you move your tax home to the US. Which 99.99% of US accountants will never have heard of. Zzzzzz.

[flames9]

And good chances the IRS dude that you phone wont know about form 8891 either,lol Mine didn't when I called a few years back! It is a fairly new form, been around for around 5 years now, if that!
As wel li was told: that yes the IRS wil not tax you on your RRSP--if you fill out form 8891, BUT your State may still tax you on them! Virginia doesnt.