The Steele Wealth Management team has received a tremendous increase in inquiries from prospective cross-border clients regarding issues to consider when there is an obligation to report to both the Internal Revenue Service (IRS) and the Canada Revenue Agency (CRA). Our cross-border clients have unique investment, tax and estate planning challenges. Although each client’s situation is unique, we frequently address some common issues in our planning. This newsletter is a collection of these issues.


Our cross-border clients have tax reporting obligations in both Canada and the US. Under Canada’s tax system, income tax reporting obligations are based on residency status. Residency status is determined on a case-by-case basis. Generally however, those with significant residential ties with Canada (such as employment, home, spouse or dependents in Canada) are considered Canadian residents for tax purposes. Those classified as Canadian tax residents may also be classified as US persons for US tax purposes.  A US person includes a US citizen, a US green card holder or a US resident. Those classified as US persons are subject to US income tax, US estate tax, and US gift tax.


It is possible to be a US person, with the obligation to comply with US tax law, without being aware of this status. An example we frequently address is children born in Canada to a parent who is a US person, even if the child never resided in the US. Another example is children born in the US that move to Canada early in life. These children are considered US persons with an obligation to file tax returns.

ignoring the OBLIGATION does not make it disappear!

Cross-border clients have reporting obligations in both Canada and the US. We have found that many who are considered US persons but now live in Canada have ignored this obligation. Unfortunately, ignoring the obligation does not make it disappear! US persons living in Canada have potential exposure to significant IRS penalties for unfiled tax and information returns.

Renouncing citizenship also does not make the requirement disappear because certifying that the prior 5 years of income tax filings are complete is part of the US citizenship renouncing process. The risk, of not being able to certify this when citizenship is renounced, is becoming a Covered Expatriate that has another set of complicated rules. Our team at Steele Wealth Management understands all of these issues and we have strong connections with cross-border tax and immigration professionals. We facilitate meetings with these other professionals to make sure our new clients get the advice and help they need to become compliant.  


Canadians moving to the United States need to plan ahead:
There are many issues for a Canadian to consider when relocating to the US. We recommend that clients start planning their move as early as possible to minimize tax and maximize financial planning opportunities. The more tax years available to plan the move, the more tax opportunities are available. Our newsletter Tax Emigration Checklist for Canadians moving to the United States” should be reviewed for recommended actions.

US Persons moving to Canada need to plan ahead:
Similarly, a US person who is planning to move to Canada also needs to start planning their move as early as possible.  Planning includes tax-minimizing strategies based on recognizing certain types of income in the US to avoid higher Canadian tax. This income may include bonuses, exercising stock options, capital gain dispositions, 401(k) conversions, IRA conversions, and gifts. There are strategies to consider for assets such as 401(k)/403(b) and similar employer plans, Roth employer plans, IRAs, Roth IRAs, investment accounts, annuities, bank accounts, life insurance, medical insurance, real estate, and personal belongings. Consideration needs to be given to account transfer costs, disposition costs, tax, customs, duty, and physical moving logistics for each asset. Other considerations include filing the appropriate exit documentation with the IRS and US Customs and Border Protection on time.


One tax planning strategy when moving to Canada is to file an election with CRA to ensure that income earned within a Roth IRA is deferred and considered a pension under the Canada-US Tax Treaty. The election allows deferral of income accrued in the Roth IRA. The election is a one-time filing that must be made by April 30th after the year the client becomes a resident of Canada. No contributions or conversions may be made to the Roth IRA after becoming a Canadian tax resident; otherwise, the tax-free status is tainted. It is crucial to file this election on time.

Track Separate Adjusted Cost Bases

For Canadian tax purposes, there are deemed acquisition rules that apply on the date that Canadian tax residency status is attained.  On that date, the fair market value of an asset becomes the adjusted cost base for Canadian tax purposes. The assets to which the deemed acquisition rules apply include foreign currency, securities and real estate located outside of Canada (but exclude real estate located in Canada). These rules work so that any gains or losses accrued before Canadian residency are not included in determining a future Canadian tax liability. However, for US tax purposes, there is no adjustment to the adjusted cost base. As a result, when the asset is sold the gain or loss subject to US income tax is based on the original cost. Therefore, for our cross-border clients who migrated to Canada, it is imperative to track two adjusted cost base amounts for each asset.

Say no to US executors of Canadian wills

To avoid problems with both Canadian and US tax, a person who is considered a Canadian resident for tax purposes should not appoint a US person as an executor. With a US executor, the estate may be considered non-resident for Canadian tax purposes requiring withholding tax on income earned by the estate, and the possibility of withholding requirements on the sale of real property. As well, the estate may be considered a US taxpayer obligated to file and pay US income and estate tax.

It is important to review a current will to ensure that it properly addresses legacy wishes and that it considers assets located in both countries. It may make sense to have separate wills in each country or for a specific asset. Our webinar Wills Gone Wrong” should be reviewed for recommended actions.


There may be Canadian tax implications for a trust that was created in the US and the settlor, trustee or beneficiary becomes a resident of Canada. The trust may now be considered resident in Canada as well. For Canadian tax purposes, the residence of a trust is determined on a case-by-case basis according to the facts and circumstances. Generally however, a trust resides where management and control of the trust actually takes place. Therefore, if trustees become resident in Canada, the trust may also become resident in Canada for tax purposes. When this happens, the trustees are required to file trust information and income tax returns in Canada. In addition to the administrative burden, this may result in additional tax in Canada.

There may also be punitive tax consequences in the US for the beneficiaries of a trust that has become a resident in Canada. There are some punitive US tax rules, called the “throwback rules” for income paid to a US person beneficiary out of a trust that is resident in Canada. The rules are incredibly complex but in general, income and capital gains that have accumulated in a non-US trust and are then paid to US beneficiaries in the subsequent tax year are taxed at a higher US tax rate than if paid to the US beneficiary in the same year earned. If the throwback rules apply, accumulated income paid out in a future year may lose its character and be taxed as ordinary income. Furthermore, an interest charge may be applied to the tax owing since US tax was not paid during the time the income was accumulating in the foreign trust. The bottom line is that the structure of any trust created outside of Canada needs to be reviewed for the tax status of the trustees and in turn the tax status of the trust.


Investment planning with Passive Foreign Investment Company (PFIC) reporting is challenging for cross-border clients. The PFIC rules are extremely complicated, result in punitive US tax consequences and have specific reporting requirements. Our newsletter Understanding the Punitive and Complex Taxation of PFICs is a comprehensive discussion of this issue. The Steele Wealth Management team have strategies to mitigate the application of the PFIC rules. We make sure that investments are structured properly according to specific client circumstances.

PLAN FOR Stretch IRAs under the current rules

The “stretch IRA” was an estate planning strategy that allowed non-spousal beneficiaries of an Individual Retirement Arrangement/Account (IRA) to withdraw from the inherited IRA over their lifetime while the IRA continued to grow tax-free. The strategy worked because IRA beneficiaries took required minimum distributions (RMD) based on their own age, a particular benefit if the IRA beneficiary was a grandchild and great-grandchild. The younger the beneficiary, the smaller the RMD and the longer the account could grow tax-free. The ability to use this strategy ended in 2020 with the SECURE Act, which set a 10 year period to withdraw assets from an inherited IRA for most non-spouse beneficiaries. Our newsletter The SECURE Act” discusses this legislation.

Continuing with non-spouse beneficiaries of an IRA is still an option; however, the requirement to withdraw the taxable amounts in a shorter 10-year period may substantially increase the tax payable. Strategies for estate planning under the current rules include account holders drawing down their own IRAs and using other investments to transfer wealth on death. Another strategy is to continue with beneficiaries who are minor children because they may use the stretch rules until they reach the age of majority and then will follow the 10-year rule. The beneficiaries of all IRAs must be reviewed considering the changes in the stretch rules.


The currently available US gift tax exemption should be reviewed to determine whether it makes sense to lock in all or part of the exemption now. The base exclusion amount for 2022 is $12,060,000 USD. However, there is proposed legislation that will reduce the amount of the exemption and regardless of pending legislation; the current tax law schedules the exemption to return to $5,000,000 USD as of 2026 (indexed to inflation). The opportunity to use the current exemption should not be missed if it is expected that an estate may be worth more than the reduced exemption on death. Consideration should be given to giving gifts to adult children now instead of waiting until death. Gifts to adult children are not subject to Canadian tax attribution rules, but may trigger Canadian capital gains on assets that have increased in value from the Canadian cost (see the discussion above regarding tracking cost bases). The US gift tax rules need to be taken into consideration when reviewing a cross-border estate plan.

Contact us for help

At Steele Wealth Management, we understand the challenges involved in managing wealth in both countries and our experience with complicated situations has provided us with the expertise to help. The issues discussed in this newsletter are just a small sample of the complications that we help our clients address.  We are different because we integrate Canadian and American wealth. Steele Wealth Management is part of the Raymond James Financial family of companies. Raymond James (USA) Ltd. is a Canadian based US registered investment firm offering integrated cross-border wealth management solutions to Americans living in Canada and Canadians living in the US. Our team is licensed and regulated in both countries and is recognized in North America as a foremost cross-border wealth management team. We offer more than just a Canadian wealth management solution. We offer a consolidated wealth management solution and coordinate entire portfolios of assets to keep our clients on track to achieving their vision and financial goals.