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What if the Simpsons Moved from Springfield to Canada

10.31.24 // Markets & Investing // Blog Article //

Written by Carson Hamill CIM®, CRPC®, Associate Financial Advisor & Assistant Branch Manager & Dean Moro BComm, CIM®, Financial Advisor & Associate Portfolio Manager

Imagine the Simpsons packing up and leaving Springfield for Canada. While Homer searches for a new bar to replace Moe’s Tavern and Bart scopes out fresh prank targets in Ottawa, the real challenge would be managing their cross-border finances. Moving to a new country means more than just adjusting to a different lifestyle—it requires navigating new rules for retirement savings, college plans, real estate, and estate planning. In this blog, we’ll explore how the Simpsons can manage their money and make a smooth transition to life in the Great White North.

Homer’s 401(k)

After decades of snoozing at the Springfield Nuclear Power Plant (and occasionally pressing the “any key”), Homer has built up a solid 401(k). Now that he’s moving to Canada, he can roll it over into an IRA. Why? Because an IRA gives him more control over his investments—something Mr. Burns probably wouldn’t approve of. No more limited options like “investing in Mr. Burns' Evil Corporation” or “taking Lenny’s advice on stocks.”

Rolling over his 401(k) also makes Required Minimum Distributions (RMDs) easier. IRAs follow standard IRS guidelines, giving Homer less to worry about. Plus, it’s better for Marge and the kids—if Homer were to pass away, the IRA’s inheritance options are more flexible and tax-friendly compared to a 401(k). After all, you don’t want taxes bigger than Homer’s tab at Moe’s​.

CLICK HERE to read more about the reasons to transfer your 401(k) to a rollover IRA

Social Security in Canada

Good news! If Homer and Marge move to Canada, they can still collect U.S. Social Security benefits, as long as they have earned enough work credits (typically 10 years of credits). Additionally, thanks to the U.S.-Canada Totalization Agreement, they can qualify for Canada Pension Plan (CPP) benefits if they work in Canada. So while Homer might be lazy, his Social Security and CPP benefits will keep working hard.

If Marge worked part-time in the U.S. but didn’t reach the 40 credits required for U.S. Social Security, she can still benefit from the Totalization Agreement after moving to Canada. Here’s how it works:

  • Combining Credits: If Marge earned at least 6 U.S. credits (about 1.5 years of work), she can use her Canadian work history to help meet the 40-credit requirement for U.S. Social Security.
  • Receiving Benefits: Marge can still receive U.S. Social Security, but it will be based on her U.S. earnings.
  • Benefit Amount: The amount Marge receives will depend on her part-time U.S. work, so it won’t be as much as someone who worked 10 full years in the U.S.

However, there’s a potential downside. If Homer or Marge start collecting CPP, the Windfall Elimination Provision (WEP) may reduce their U.S. Social Security payments. Think of it like the time Homer got excited about free bowling lessons, only to have them taken away. WEP can similarly reduce their Social Security checks if they’re receiving both U.S. Social Security and CPP.

One positive note: under the U.S.-Canada tax treaty, Social Security benefits are only taxed in the country of residence, meaning they won’t face double taxation.

CLICK HERE to read about qualifying for both Social Security and CPP

Bart and Lisa’s College Savings: 529 Plans and RESPs

Bart may have dreams of pulling pranks at McGill, but how will the Simpsons fund their kid’s education? Luckily, the 529 Plan they have can be used at many Canadian universities like McGill, UBC or the University of Toronto. The catch? While a 529 is tax-advantaged in the U.S., Canada doesn’t offer the same perks. Any earnings from the plan could be taxed in Canada—ay caramba!

Alternatively, Homer and Marge can open a Canadian RESP (Registered Education Savings Plan). The RESP even comes with government grants. But there’s always a catch—because they are U.S. citizens, the IRS treats the RESP like a regular taxable account. So, while the grants are tempting, the IRS paperwork could feel as long as one of Grandpa’s rambling stories​.

CLICK HERE to read more about Registered Education Savings Plans (RESP) for U.S. Individuals

Real Estate: Sell the Simpson Home and Avoid a Tax Time "D’oh!"

Before leaving Springfield for good, Homer and Marge will likely sell their iconic yellow house. Luckily, the U.S. capital gains exclusion means they won’t have to pay taxes on up to $500,000 in profits. That’s more than enough to cover Homer’s donut habit!

In Canada, they’ll benefit from the Principal Residence Exemption, which means any profit from selling their Canadian home would be tax-free for Canadian tax purposes. But since they’re still U.S. citizens, they could face U.S. taxes on any gains over $500,000. If their new Canadian home appreciates significantly, they might get a tax bill even Mr. Burns would cringe at​.

CLICK HERE to read more about U.S. individuals buying a home in Canada

Estate Planning: Who’s Handling Things When Homer’s Gone?

When Homer and Marge move to Canada, they’ll need to update their wills. But there’s a wrinkle: if they name Bart, Lisa, or Maggie as executors and one of them moves back to the U.S. (Lisa’s Harvard scholarship, perhaps?), it could create tax issues. A U.S. resident acting as an executor of a Canadian estate could mean filing U.S. tax returns—D’oh! To avoid this headache, Homer and Marge should choose Canadian residents as executors​.

CLICK HERE to read more about choosing a U.S. resident as your executor requires caution

Life Insurance: “D’oh! I Didn’t Know That Could Be Taxed!”

Here’s something that could make Homer drop his donut: If Homer and Marge own life insurance policies and still hold them when they pass away, the death benefit may be included in their U.S. taxable estate. Yes, even if it’s a term life policy with no cash value. The IRS treats policy ownership as a taxable asset, which could leave the family with a tax headache bigger than one of Bart’s pranks.

To avoid this, they could transfer ownership to Marge or place the policy in an irrevocable life insurance trust (ILIT)​. However, when transferring an existing policy into this type of trust, there’s a three-year waiting period before the death benefit can be excluded from the taxable estate. The transfer may also trigger a deemed disposition resulting in taxable income inclusion, as well as U.S. gift tax issues. It’s also important to calculate whether annual gifts to the trust to pay premiums will fall within a U.S. citizen’s gift tax exclusion room.

CLICK HERE to read more about how life insurance gets complicated for cross-border clients

FBAR (Foreign Bank Account Report)

If you are a U.S. citizen living in Canada, like Homer and Marge Simpson, don’t forget about the FBAR (Foreign Bank Account Report). If the combined value of your Canadian bank accounts, which includes checking, savings, investment accounts, and even Canadian retirement accounts like RRSPs, exceed $10,000 at any time during the year, you must file an FBAR with the U.S. Treasury. Failure to file can result in hefty penalties. Even joint accounts, or those in retirement plans, require filing. Staying compliant is essential to avoid fines and keep your finances on track.

CLICK HERE to read more about FBAR (Foreign Bank Account Report)

Final Thoughts: Moving to Canada—Eh, It’s Not So Bad

Moving to Canada might mean giving up Krusty Burger, but it also means new financial rules. From retirement plans to college savings and real estate, the Simpsons have some big decisions ahead. With the help of a cross-border financial advisor, they can avoid turning their move into a “Simpson-sized” disaster. After all, Homer wouldn’t run the nuclear plant without a manual (well, maybe he would), so why handle cross-border finances without expert help?

Whether you’re planning your own move or just imagining the chaos the Simpsons could cause in Canada, remember expert advice makes all the difference!

Next Steps

If you are planning on moving to Canada and need assistance with your investments, estate planning, and portfolio management, please call or email our team at Snowbirds Wealth Management, as we specialize in cross-border financial planning and wealth management. We work closely with experienced cross-border lawyers and accountants to ensure you have an integrated team in your corner.

About Snowbirds Wealth Management

Gerry Scott is a portfolio manager and founder of Snowbirds Wealth Management, an advisory firm focussed on the cross-border market. Together with Dean Moro and Carson Hamill, associate financial advisors with Snowbirds Wealth Management, they provide investment solutions for Americans living in Canada, and Canadians residing in the United States. Licensed in both Canada and the US, they provide tailored investment solutions to minimize the tax burden when moving assets across borders.To schedule an introductory call, please click here.

Statistics and factual data and other information are from sources RJLU believes to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities nor is it meant to replace legal, accounting, taxation or other professional advice. We are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. The information is furnished on the basis and understanding that RJLU is to be under no liability whatsoever in respect thereof.

Raymond James (USA) Ltd. advisors may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Investors outside the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Raymond James (USA) Ltd. is a member of FINRA/SIPC.

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