Keeping Accounts in Canada

Often times, relocating to the US is followed shortly by a notice from your brokerage firm saying they can no longer hold your account and you must move it immediately because you are non-resident of Canada. This may be due to an over zealous compliance officer that doesn't know what to do with a US address on a Canadian account or, a brokerage firm that is not registered in your state of residence in the US. In reality, there is no legal reason for you to have to move your registered accounts anywhere as securities regulations permit Canadian brokers to hold accounts for Canadian non-residents (see below). However, due to securities regulations that we haven’t been able to clearly identify, regular brokerage accounts have to be closed and those funds moved to the US. You simply cannot keep a regular, taxable brokerage account open in Canada when you are a resident of the US due to silly securities regulations.  

To get around this issue, some Canadian expatriates think they will "trick" the broker and the securities regulators by providing a Canadian address of a family member, friend or post office box to the broker.  Besides breaking Canadian and US securities laws and being subject to fines and penalties, there are several other problems with doing this:

	Your brokerage firm, if aware of your US residency, could be subject to harsh fines and penalties for putting a Canadian address on your account when residing in the US.
	For ANY dividends and interest paid into your brokerage account, no withholding will be taken as required by the Canada/US Tax Treaty and you are then required to remit the correct withholding on a Part XIII tax return to Canada.  This income must also be reported on your US tax return resulting in potential double taxation.
	Lump-sum RRSP withdrawals or RRIF payments will most likely have the incorrect withholding taken as required by the Canada Income Tax Act and you will be required to remit the correct withholding on a Part XIII tax return to Canada.  In addition, ANY income that has accrued inside your RRSP/RRIF must be reported on your US tax return.
	You will not receive your monthly investment statements in a timely fashion because you will be reliant on your family, friends to send them to you when it is convenient for them.
	Your confidentiality could be compromised if your confidential information ends up at a "trusted" friend or relatives house.

Another issue often overlooked are the restrictions on trading in your Canadian RRSPs and other registered accounts while resident in the US .  Until recently, the Securities & Exchange Commission prohibited Canadian brokerage firms from making trades in these accounts for US residents because of fears of insider trading and proper accounting of the income in these accounts.  The Investment Dealers Association in Canada successfully lobbied the SEC and in 2000, they agreed to allow trading in these accounts.  However, the States did not readily follow along and now the Investment Dealers Association has negotiated with all 50 states to allow Canadian dealers and advisors to continue working with US residents.  So far, about 35 states have some form of approval in place, but it depends on the state and which resolution they have adopted.  Before making trades in your account, you should inquire with your broker to make sure they are registered with the SEC and with the state you reside in (your state must have adopted the appropriate legislation or policies).

Another common area overlooked is what happens to accounts in Canada if the account holder dies while resident in the US ?  Typically, the probate process has to be endured twice, once in Canada and once in the US .  See the Estate planning section of this website for more details.