If you are thinking about making a permanent move out of the country at some point, start planning now, because there’s a lot to do. For many Canadians, the idea of settling down in a warmer climate is becoming increasingly attractive. Whether you do or not is, of course, a very personal decision. If you decide to move, how you structure your fi nancial plan depends on your unique situation and your lifestyle goals and needs. There is a lot to consider. Lifestyle should be at the top of your list of issues, including such essentials as medical care and housing. But your investments, and how your income stream and tax situation are structured, will also affect how and where you’ll be living. Some of the issues are complex, and you need to look at all of them in detail well before you set your plan in motion.

Taxing decisions When you leave Canada, you are deemed to dispose of all your assets at fair market value. There are exceptions for property that Canada retains the right to tax at a later date, such as Canadian real estate. Most portfolio investments, however, will be subject to the deemed disposition. If you have saved and invested in nonregistered assets wisely during your working years, the deemed disposition of your investments could trigger a large capital gains tax liability. In addition, you’ll need to think about the potential taxes on your estate when you pass away. Canada has no estate tax, but in the United States, for example, estate taxes can be as high as 50% of the value of the estate. To avoid these onerous liabilities, it is essential that you obtain professional tax advice before leaving the country. You will also want to obtain advice on the rules of the country to which you are planning to move.

Investment decisions

There is a U.S. Securities and Exchange Commission (SEC) rule that prohibits persons who are not registered with the U.S. regulator from giving investment advice or selling products to residents of the U.S. Individual states also have securities restrictions. As a result, you could lose control over your Canadian-based investments. There is a federal exception for registered plans, but this exemption does not apply in all states. Retirement Solutions Comprehensive continued on next page

Income decisions

While some pension and registered investment plans are not subject to a deemed disposition upon leaving Canada, there is some question as to how you should treat those investments when you are planning to retire elsewhere. It may be possible to structure your cash flow for optimal tax efficiency. For instance, in the U.S., a portion of your RRSP income may not be taxable. As a U.S. resident, you would have to pay a 25% withholding tax to the Canadian government when you withdraw money from your RRSP, which may still be less than you would pay in taxes by making similar withdrawals in Canada. Furthermore, the withholding tax may be reduced to 15% if you have a RRIF and take no more than two times your minimum RRIF payment each year. If you do not take sufficient steps to sever residential ties with Canada, the Canada Revenue Agency (CRA) may still consider you a Canadian resident, subject to taxation on worldwide income. Be aware, however, that severing your residential ties with Canada is not as straightforward as it may sound. It may entail giving up your home, cottage or other ties. Be sure to get advice from a tax professional wel lin advance. Medical coverage is another concern. Canada’s system of providing basic medical coverage to all of its citizens is not available in all countries. Given the enormous cost of medical services in the U.S., it is critical to obtain private health coverage. Depending on your age and health, the premiums on this insurance could be significant. The best way to ensure that your move outside Canada lives up to your expectations is to plan in advance.

Is it the right decision?

For a kinder climate and lower taxes, leaving Canada holds a certain appeal for many people. But, it can be a difficult move psychologically — especially if you are leaving family behind. What many non-residents miss is the sense of community that they had in Canada, with family and friends nearby. They never feel truly ‘at home’ in their new country. Language may be a barrier. In other cases, political instability is — or becomes — a concern. Changing your mind can be costly both from a financial and emotional perspective. That’s why it’s so important to be sure it’s the right move, before you sever ties with Canada. One of the most effective strategies is to stay for an extended period in your prospective community. Try to stay for a few months at different times of the year, so you get a sense of your new environment in all seasons. This will also give you plenty of opportunity to begin building social ties to your new community. But before doing so, it’s wise to speak with a tax professional. Certain time limits for your departure may apply, which could have tax implications.