USA to Canada - Moving Investments

This is an update to my guide to moving to Canada, covered in this post.

One of the issues with moving is getting your investments moved from the USA to Canada.  Why would you bother?

1. The USA will consider you to still be a resident and will expect tax payments on your income.  But you now live in Canada, and the Canadian government expects payments on this same income.  Untangling this mess will take a lot of time and money from your tax accountant.
2. Your US broker will likely kick you to the curb if they find out that you moved out of the USA.  They will quickly close your account and you will have to scramble fast to get the investments moved.  If you don't move the investments before the brokerage acts, they will sell all investments with resulting capital gains that you will owe to the USA and Canada.
3. You will not be able to claim any Canadian tax reductions on dividends as your investments are held by a US brokerage and they don't calculate Canadian tax reductions.  You will also have more paperwork to submit concerning foreign investments, just trust me on this one.
4. NB: You actually end up with two cost bases when you move from USA to Canada:
1. The USA considers your cost basis to be what you paid for the investments.
2. Canada considers the cost basis to be what the investments were worth when you moved.

So how do you make this transfer?  It does depend on the investments and the US brokerage or mutual fund company you used.

1. If you can, convert your US mutual funds to ETFs.  Vanguard will do this at no charge and with no tax consequences.
2. If you own mutual funds that cannot be converted to ETFs, you should call your broker/mutual fund dealer where your hold the mutual funds.  Call the customer service number, do not say who you are, then ask "what happens if a person who owns mutual funds with you moves to Canada?"  You may get these replies:
1. No problem.  This is good.  Keep the investments with them and just change your address.
2. You can continue to hold the mutual funds, but you can only sell them for cash, no changes in investments.  This is not so good.  You have to look at the tax consequences and your investment plan.  Should I sell immediately and take a gain or loss?  If I hold the funds for a long time, will I continue to be happy with them, will they meet my diversification goals, are the fees reasonable, etc.?  Probably best to talk to your financial planner.
3. You must sell the mutual funds.  This is bad.  Again, you need to look at the tax consequences as you may trigger large gains or losses.  Probably best to talk to your financial planner.
3. If you own stocks, bonds, or ETFs in the USA:
1. Open a brokerage account in Canada with the exact same owners as you have in the USA.  If it is a joint account in the USA, open a joint account in Canada, same for individual account.
2. Call your brokerage in Canada, get the forms to transfer from a US brokerage to their brokerage, and fill them out.  Call your Canadian broker to make sure you fill the forms out correctly and that you selected a straight transfer with no tax consequences (simple transfer of securities, no buying or selling).  Make double sure that you are doing this.  Make copies and send them via registered mail or similar method to your Canadian broker.  This will cause the US brokerage to send the securities to your Canadian broker and they will appear in your account.  Expect to get phone calls from both brokerages during the process to verify information, ask questions.  Expect to call your Canadian broker to follow up if you don't hear from them, it will likely not happen automatically with no intervention by you.
3. After the transfer is done, inform your US broker that you are a Canadian resident.  In the case of stock brokerage accounts, they will start the "kick the foreigner to the curb" process immediately. 

NB: If you are a US citizen, do not buy Canadian mutual funds or ETFs unless you are willing to submit a lot of paperwork to the US government.  These are considered PFICs (passive foreign investment company), which, for some unknown reason, the US government does not like.

Remember, you should talk to a competent financial planner before taking action.  This blog is just a single information source and a lot of information on the Internet is wrong, maybe including this blog, so do your research before taking a decision.

Photo credit: flickr