Early retirees moving back to Canada - IRA 52(t) SEPP, 401(K) Dan Walkow - Seabank Capital - Darrell Thompson, Blackmont -

As the subject says, we are both Canadians (with US green cards) currently contemplating a move back to Canada.  We are planning to start drawing from our IRAs using the 72(t) SEPP exception to avoid the 10% early withdrawal penalty.

Of course things got a lot more complicated after I caught up on the the cross border implications.

My understanding is that if we roll the IRAs into RRSPs, we can essentially get a foreign tax credit from Canada to cover the 15% tax that's withheld from our IRA custodians.  We'd be still hit with the 10% early withdrawal excise tax.  And since the 15% tax credit from CRA is in the form of a credit, that seems to imply we'd both have to get incomes from other sources that generates a tax bill greater than the credited amount?
The RRSP will get turned into RRIFs immediately so we can start drawing from them.

The other option is to leave the IRAs in the US *and* start the 72(t) withdraw.  The major downside to this strategy is potentially needing to deal with brokerage firms that freaks out over my Canadian address.  Estate planning in this case also gets more complicated.

I hope I have most of the facts straight so far, and would very much appreciate any thoughts on any alternatives I might have overlooked.  

As if this is not tricky enough, we also have two custodial accounts for the kids (both dual US/Canadian citizens), as well as Education IRA for them.  I'd also very much appreciate any thoughts on how to deal with them.

Thanks for the great resource you've provided on your website!
david ingram replies;
You are welcome - the website, of course, is how I solicit international business.  That means, of course, that most of what we do is unique or very difficult because a lot of our clients have consulted up to a dozen  consultants before finally deciding to mail their stuff here.

If you roll the IRA into an RRSP before age 59 1/2, you will not escape the 10% penalty.  Take the 72(T)  exception and just make sure that you wait at least 5 years plus a day after your first payment before taking an unlimited sum out of your IRA even if you have turned 59 1/2 .

i.e. - if you are 56 now, you must take out an equal 52(t) payment for the next five years and that means past 59 1/2  -  The rule is that when you start a 72(t) you must take it out for five years or until age 59 1/2 whichever is the longer period.  SO! do NOT take an extra payment out until five years plus a day from the first or the IRS will charge you the 10% penalty PLUS interest retroactively.  For the record, those with Employer's stock in their 401K should seek very competent help (better than me for this project) before rolling their 401(K) into IRS.  If you roll it into an IRA you lose the capital gains treatment of the employer stock within the 401(K).  And on another note, if you retire after age 55 (has to be after age 55), you can take money out of your 401(K) without the 10% penalty but if you retired or lost the job before age 55, this option is lost.out a

There are two people I can recommend to deal with your cross-border IRA problems.  They will not throw up their hands  or freak out or be hamstrung by the cross border issues because that is what they do. 

Dan Walkow left BMO Nesbitt Burns and founded his own company, SEABANK CAPITAL  (www.seabankcapital.com) to deal with people in your position.  Seabank and Dan are Canadians and licenced to deal all over the US from Canada and to deal with Canadian residents who have IRS's, 401(K) and other US financial accounts etc.  In other words, ANYONE who is transferred to Canada with US accounts or any Canadian transferring to the US with Canadian accounts they want to keep should use Dan Walkow or

Darrell Thompson of Blackmont Securities. (www.blackmont.comBlackmont is the former Yorkton Securities and Don Risling got them registered all over the USA as well for this very purpose.   

However, just having the company registered is not enough.  The individual representative has to believe in the process and go to the effort to be educated and licensed where necessary themselves and this is a monstrous undertaking first described to me by Shaun Rickerby of TD Investments.  As i understand it, Shaun recognized this and he and a dozen others from TD Waterhouse went to the effort to get themselves registered and them TD backed off and instead of embracing the concept sent all of their clients with foreign addresses, notices that they could not deal with them any more.

A reader wrote that Canaccord Capital US was licenced to deal with US residents with Canadian RRSP's and suggested Rick Langer to handle that situation.  I know of Rick from Mining conferences, etc.  If you look at Rick's Bio on the Canaccord site at http://www.canaccord.com/private/iaprofiles/Vancouver17thFloor/r_langer.htm,
you will see why i would suggest that you should see him if you are interested in Flow Through Mining shares, but would not think of him as a US Canadian retirement specialist even though the Company is licenced. to do so. I have not been able to locate anyone else at Canaccord either who lives, breathes and eats cross border issues.

Compare that to the Walkow site - www.seabankcapital.com which starts out with

Welcome to Seabank Capital. We are a Canadian based private investment management
boutique serving clients in Canada and the United States.  Choosing us to help you manage
your investments gives you the advantage of having a team of investment management
professionals with extensive investment experience and global investment credentials working
exclusively on your behalf, every day!

In other words, cross border financial transactions is what Seabank Capital was founded to look after rather than something put together to try and keep on dealing with clients who move away.

So there are solutions.   The biggest problem is that the people in the business will not usually send your account away to someone like Dan or Darrell who are set up to look after you. Brokers work hard to get a $500,000 account.  Sending it to someone else is just not in their nature.  Sorry stockbrokers, but i have been doing this for many, many year, 45 to be exact.  Had offices in 30 states and 5 provinces.  Have talked to thousands of people with cross border issues.  I do NOT remember a single instance where a client has told me that a broker has sent them to someone else at a different company to handle a problem. 

To be sure though, I discovered Shaun Rickerby because another TD broker, Barry Lloyd sent his very significant out of country client to Shaun.
I send people to other specialists every day.


Just in case, you do not like Canada after returning, it is my opinion that you should keep your green cards active for a couple of years anyway to make sure you have settled in.  You do NOT have to give them up when leaving.

Simply mail form I-131 to Homeland Security BEFORE you leave the US and you can keep them for 3 or 4 years (my record for a client was 8) anyway.  You have to send the form in every year but it will let you decide whether you really want to be here.  Too many people give up their green card when they come back, decide they would rather be living in Texas or Washington States and find that they no longer qualify to go back and live in the US.  Half the time it is because the husband dies and mom wants to go live in Chicago to be near the grandkids and can;t make the move.

In fact, if there is a strong possibility (there is with Dual citizen children), you should just take out US citizenship before you leave.  Sure, you have to fill out two tax returns but you have so much more freedom.




david ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325

Calls welcomed from 10 AM to 9 PM 7 days a week  Vancouver (LA) time -  (please do not fax or phone outside of those hours as this is a home office) expert  US Canada Canadian American  Mexican Income Tax  service help.
pert  US Canada Canadian American  Mexican Income Tax  service and help.
David Ingram gives expert income tax service & immigration help to non-resident Americans & Canadians from New York to California to Mexico  family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
Phone consultations are $450 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada. ($472.50 with GST for in person or if you are on the telephone in Canada) expert  US Canada Canadian American  Mexican Income Tax  service and help.
This is not intended to be definitive but in general I am quoting $900 to $3,000 for a dual country tax return.

$900 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only (but were filing both countries) - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
$1,200 would be the same with one rental
$1,300 would be the same with one business no rental
$1,300 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
$1,600 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,700 would be for two people with income from two countries

$3,000 would be all of the above and you moved in and out of the country.
This is just a guideline for US / Canadian returns
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $200.00 up. However, if you have a stack of 1099, or T3 or T4A or T5 or K1 reporting forms, expect to pay an average of $10.00 each with up to $50.00 for a K1 or T5013 or T5008 or T101 --- Income trusts with amounts in box 42 are an even larger problem and will be more expensive. - i.e. 20 information slips will be at least $350.00
With a Rental for $400, two or three rentals for $550 to $700 (i.e. $150 per rental) First year Rental - plus $250.
A Business for $400 - Rental and business likely $550 to $700
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
Moving in or out of the country or part year earnings in the US will ALWAYS be $900 and up.
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00 each.
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.

Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable.  In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years.  We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund. 

Email and Faxed information is convenient for the sender but very time consuming and hard to keep track of when they come in multiple files.  As of May 1, 2008, we will charge or be charging a surcharge for information that comes in more than two files.  It can take us a valuable hour or more  to try and put together the file when someone sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and emails for instance. 

This is a guideline not etched in stone.  If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully.


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