Financial Planning Across the Canada – U.S. Border

As a financial planner who specializes in cross-border financial planning, it is my job to ensure that clients with cross-border tax exposure invest as efficiently as possible, without sacrificing exposure to a properly customized and balanced set of investments (after all, we don’t want to let the tax-tail wag the investment-dog).  While there is no escaping a U.S. citizen’s obligation to file an annual income tax return, steps can be taken to ensure tax efficiency (i.e. – the minimization of the combined taxes paid to both Canada and the U.S.).

It is also my job to consider a client’s retirement objectives.  My recommendations (i.e. – where to hold your investments, what type of retirement account, what currency, and/or what asset mix) could be very different for someone who is considering retirement in Canada than for someone who is considering retirement in the U.S. My recommendations would also differ if an individual’s ideal retirement location is uncertain.

The key to remember is that people with cross-border exposure require additional planning, because they have to navigate two sets of rules. Take for example professional athletes. We are all very familiar with the major North American professional sports leagues (including – but not limited to – the NHL, NBA, NFL, and Major League Baseball).  Athletes in each of these leagues undoubtedly have cross-border financial issues. With the exception of the NFL, each of these leagues has Canadian-based franchises. Accordingly, each league includes U.S. citizens working in Canada (whether temporarily via the visiting teams, or permanently as a member of a Canadian-based team). Also, each league includes Canadian residents working in the United States (whether temporarily or permanently).

One important item that constantly comes into play (forgive the pun) with respect to cross-border athletes and their compliance obligations is the Canada-U.S. income tax convention (aka – “the treaty”).  In addition to the regular treaty articles that govern employment income, the treaty contains a special article that relates to artists and athletes. This article can save athletes significant income tax on their signing bonus, and even exempt income from taxation in one country or the other, where a league has regularly scheduled games in another country.

Again, knowledge and application of these sorts of provisions are crucial when it comes to financial planning for the cross-border individual – whether that individual is a professional athlete or not. Keeping familiar with both sets of rules allows cross-border financial planners to strive in this challenging and rewarding career. To me, helping someone with twice the complexity is twice as interesting, and twice as rewarding.

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These articles are for general informational purposes only. Please obtain professional advice before taking any action based on this information. No endorsement or approval of any third parties or their advice, information, products or services should be implied by any references to third parties contained in any article. Trademarks cited in these articles are the respective properties of their owners.

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