home | Feature Articles | Five Crossborder Investment & Financ . . .
 

Five Crossborder Investment & Financial Planning Issues Procrastinated Over Most

Five Crossborder Investment & Financial Planning Issues Procrastinated Over Most

Courtesy of Naveen Gopal, Pacifica Partners

When Canadians expatriate to the US, there are common investments-related challenges that commonly arise. In our experience with clientele, some of these are procrastinated over for several years before action is taken.

1. Dealing with "Frozen" RRSPs:
RRSPs, LIRAs and other Canadian investments commonly become "frozen" as your investment advisor or financial planner may not be authorized to take your orders and direction once you've expatriated.  Canadian mutual funds may also become an tax issue once you become a non-resident.

Why you shouldn't procrastinate:  As the 2008 financial crisis has shown, leaving portfolios to fend for themselves can jeopardize retirement goals.  In addition, as you get closer to retirement, your investment risk appetite changes as well.  Finally, the investment landscape is always changing. What worked during the last cycle, may not work going forward. You work hard; ensure your money is taken care of!

2. Dealing with "Restricted" IRAs
IRAs, 401k and Roth Plans, along with other US investment accounts often become restricted from trading purposes once you become a non-resident of the USA.

Why you shouldn't procrastinate:  Much like with #1, market cycles and corrections can erase gains or create significant losses if proactive strategic management, or at the least, quarterly rebalancing efforts are not undertaken.

3. Reconciling between CPP and SS Credits
Crossborder workers and citizens who have lived and worked in both the USA and Canada often have accumulated CPP (Canada Pension Plan) and SS (Social Security) credits.  Reconciling between these is a good discussion to have with your Crossborder Consultant / Adviser or Tax Specialist.

Why you shouldn't procrastinate:  While this issue is most pressing as you approach retirement years, if you have moved cross-border for work purposes, knowing where you stand can be a key factor in deciding when and where you plan to retire.  It may also have ramifications for present and future tax and retirement planning.  Visit the following website to learn more about SS, CPP and the Windfall Elimination Provision:
http://www.ssa.gov/retire2/anyPiaWepjs04.htm

4. Ensuring you've filed important documents like the IRS Form 8891 and FBAR TDF 90.22-1
The importance of filing these documents on time and accurately cannot be understated. 

Why you shouldn't procrastinate:  In the case of the 8891, not deferring RRSP gains and/or income can have significant tax consequences.  For the FBAR form, the penalties are severe.  If you have any questions about the above, contact us or your accountant or cross-border expert immediately.  There are several details to note regarding how and when to file these types of forms.  Please google "IRS Form 8891" and "FBAR TDF 90.22-1" to go to the Social Security website to learn about your annual reporting obligations.


5. Having multiple investment accounts with separate advisors:
Individuals with portfolios in both Canada and the USA often have them with multiple advisors or brokerages, all who send separate statements. 

Why you shouldn't procrastinate:  If you can't measure it, you can't manage it.  Investment accounts held in numerous places often results in non-action and a lack of co-ordination between accounts.  Common problems that arise:
• Having several portfolios does not equate to efficient diversification, as some sectors are ignored and opportunities missed. 
• There is often high portfolio redundancy, with significant overlap of similar positions and highly correlated funds and holdings - often at a higher cost. 
• Impaired tax planning and portfolio structure, leading to management inefficiencies.

By Naveen Gopal
Pacifica Partners Capital Management
Crossborder Wealth Management
naveen@pacificapartners.com