3 Things I wish I knew before moving to Canada
This month marks my 10th anniversary here in Canada. It is weird to write that sentence as it feels like just a few years ago I stepped off the runway at YYJ with a very pregnant wife and plans to head back to either New York or London after the birth. Well, as fate would have it, we ended up staying and stumbling backwards into the business we now run together. Given my personal background, other people moving to Canada often ask me what are some of the things I know now that I wish I knew back then. The irony of that question is that there were so many things we did wrong both before we got here and after we landed that I needed to put together a list of the top 3; . Full disclosure, this is specific to my situation; working age, non-US spouse, PR application pending, ect.
- Getting our finances in order BEFORE we moved to Canada . Now this one is 100% on me. You would think a Wall Street trader who spent the better part of a decade in different posts around the world would have planned better, but I didn't. As an American working in London, I understood I always had to "file US taxes" but the filings were always done on my behalf and I never took the time to learn the nuances of the cross-border tax code (hey, I had a full-time job at the time). What made my mistake so costly was that I had two calendar years of artificially low income (we traveled the world for 18 months) and missed out on the planning opportunities (backdoor ROTH, unrealized capital losses, UK pension transfer, ect). Everyone moving to Canada needs to take stock of the following:
a. Any investment accounts (tax-deffered/tax-free, taxable) need to be analyzed before crossing the border. Are there any changes that need to be made pre or post move? Consider costly T1135 filings for taxable accounts after entering Canada. Your taxable account has to keep transactions and line items to a minimum or you will be eaten up in cross-border tax prep every year.
b. Are there accounts you can consolidate (combine multiple 401ks into an IRA), pensions you can transfer (I missed out on the window to transfer my UK pension into a LIRA and now it is stuck there until I am 55)?
c. New Canadian address, will they allow it? Will the account be restricted in any way (Vanguard only allowed me to sell securities, no new purchases)?
d. Beneficiaries, are they updated? Can I have a Canadian resident beneficiary (hint, my 401k plan would not allow it)?
e. Bank accounts, do you have a US based bank account active? If possible, it makes it much easier to retain a US based bank account for at least the first few years as you cannot make online payments to the US from a Canadian bank (even if it's a USD account).
- Establishing credit/buying a home in Canada. Upon arriving I was shocked to discover that the previous credit history I established over the years in both the US and UK was meaningless here in Canada. My first credit cards had to be "secured" by purchasing a CD at the bank in the amount of my credit limit. This went on for 24 months before I could receive a "regular" credit card.. We rented for the first year to figure out where we wanted to buy. In hindsight, I should have worked with a bank that was familiar with US based investment accounts and would lend based on that or simply give me a credit card (at this point that is where all my assets still were). Upon buying the home we were instructed by our lawyer to both be on title (standard protocol here in Canada). However, given our situation (I am a US citizen, my wife in Canadian only) this created future capital gains exposure on the US side. We luckily discovered this a year later and was able to transfer the title into my wife's name without triggering transfer tax. In hindsight, this saved us a fortune as real estate took off post our purchase in 2012.
Working in Canada when I arrived. Again, this should have been something that I was aware of before I came. The typical PR spousal sponsor application can take anywhere from 6-18 months depending on the backlog of applications in the pipeline. Entering/living in Canada with a Canadian citizen spouse while this application is pending is not an issue. The issue arises for the PR applicant when they want to work here in Canada before the application is approved. The process of hiring someone without a PR card involves the employer submitting a labor market opinion (LMO) before extending an offer. This process ensures that the applicant is not filling a job that a Canadian could do. To obtain the LMO is expensive, time consuming and laborious for the employer. There are some work arounds that are available such as the BC nominee program, I for instance qualified under the old NAFTA program as an economist because of my previous work experience. Nevertheless, until the PR application is approved the options for working is severely limited.