Few Americans would consider California a tax haven — but don’t say that to Dale Walters. A planner who specializes in helping Canadians settle in the U.S. to cut their tax bills, Walters might launch into long explanations of the U.S.-Canadian tax treaty, the lack of deductions in the Canadian tax system, or the (relatively) low income level that triggers the highest tax brackets north of the border.

Walters, chief executive of KeatsConnelly, is a get-into-the-weeds kind of guy — just the right sort to negotiate the oft-complex world of cross-border planning.

A CPA by training, Walters went to a networking event 20 years ago and hit it off with a Canadian expatriate who had started a planning practice focused on Canadians. Now the two serve as a tag team, writing books, holding seminars and running a cross-border practice that now brings in roughly $6 million a year.

KeatsConnelly helps Canadians manage a variety of financial tasks: buying U.S. real estate, for example, or working through the tricky details of cross-border retirement plans to bring tax rates to single-digit levels. As a result, only about $1 million of the fee-only firm’s revenues are based on AUM compensation. By contrast, roughly two-thirds — about $4 million last year — came from fixed annual retainers ranging from $20,000 to $75,000, depending on the complexity of a client’s needs. Those cover tax planning and preparation, investment management on both sides of the border — the firm has $324 million in AUM — and help developing a path to qualify for American entitlement benefits such as Social Security and Medicare. For the highest-end clients, Walters says, KeatsConnelly’s advisors will personally check out the U.S. home they are considering buying and will book the private jet to get them there. The final $1 million of revenue comes from à la carte services offered with a law firm-style pricing model, with hourly rates broken down for everyone from the secretaries to the senior planners.

One reason for its fee structure, Walters says, is that many of the firm’s Canadian clients have yet to move assets into the U.S. Because they need substantial planning advice before they do, charging a fee on U.S. assets alone wouldn’t be profitable. In fact, he says, savvy handling of assets before the transition is one of the keys to cutting a tax bill.

Among those the firm assists, not everyone becomes a citizen. There are multiple paths to citizenship and to permanent residency, including buying a business as well as the federal Immigrant Investor Program. In addition, many clients are married to U.S. citizens.


One key task that keeps KeatsConnelly busy is managing conversions of retirement plans. Like U.S. retirement plans, contributions into a Canadian’s retirement account are deductible on Canadian returns; those who withdraw while still in Canada pay tax on every dollar.

Yet if you bring a Canadian account to the U.S., Walters says, the rules change. After all, if Uncle Sam didn’t give you a tax deduction for your contributions, the U.S. government doesn’t expect you to pay tax on the principal in the account. Once retirement assets have been moved to the U.S., Canadians only have to pay tax on two things — the appreciation earned in the account from the date it was transferred to the U.S. and any capital gains accumulated on the securities held in the account.

Therefore, the way to pay the least tax overall is to keep assets within the retirement plan, but liquidate the stock holdings while the money is still in Canada. When the account is transferred to the U.S. (still within the Canadian retirement plan wrapper), every dollar will be considered nontaxable principal. The pre-move sale eliminates tax on any built-up capital gains, too — so the client pays tax only on the appreciation from that day forward.

“For the first 18 years of my 20 years here, practically all we talked about was taxes,” Walters says. “A Canadian [who moves to the U.S.] would save about one-third on income taxes; 25% to 50% on their retirement account — and there are 'death tax’ savings when you move your residence to the U.S., too.”

More recently, the firm has expanded its services to consider other aspects of Canadian expatriates’ financial plans. For instance, advisors consider ways to boost clients’ retirement income by getting them to qualify for the cornerstone U.S. entitlement programs, Social Security and Medicare. That’s also best done when clients are still snowbirds, living in Canada most of the year but taking long vacations in the more temperate climates of California, Arizona and Florida.
It takes just six quarter-year credits of work and paying into the Social Security system to qualify for a retirement benefit, Walters notes. And you can get credit for just $4,000 in reported wages — so a modest consulting gig or self-employment income from a U.S. business could do the trick. To be sure, at this minimum level, clients would get only a small stipend — but it’s paid for the rest of their life, and the spouse gets a benefit too.

More significantly for many retiree transplants, 10 full years of credits can qualify a client for Medicare. That would save the individual roughly $600 a month in premium payments for retiree health coverage. Again, Walters sometimes suggests that Canadians start or buy a U.S. business and pay themselves a salary.


Canadian clients’ portfolios often share common challenges. The typical mutual fund in Canada charges investment management fees that are about a percentage point higher than the typical U.S. fund, Walters says, so Canadian clients often have high-cost portfolios; they also tend to be heavily laden with volatile commodities, including oil, gas and timber.

After a client liquidates those investments and moves them to the U.S., KeatsConnelly uses mutual funds and ETFs to create a diversified portfolio that matches the clients’ age, assets and risk tolerance. The most significant difference in the firm’s portfolio approach is its focus on international markets. KeatsConnelly bases asset allocation on worldwide market capitalizations, and recommends that clients should have at least half of their assets overseas. While that might make some domestic clients uncomfortable, it’s an approach that plays well with the firm’s cross-border clientele.

“We could do U.S. clients, but the value we add is with cross-border,” Walters says. “It’s hard for clients to feel that they belong here if they don’t have a Canadian connection.”

Walters says seminars, books and a web forum for Canadians and Americans considering a cross-border lifestyle drive much of the firm’s marketing efforts. Roughly 1,000 prospects contact the firm each year, he says, and around 30% end up buying at least some of the firm’s services.

“Unless you’re going to become some best-selling author, there’s no money in books — but it’s great for marketing,” Walters adds. “People read our books, call in with questions and they end up being new clients.”

Kathy Kristof, a Financial Planning contributing writer in Los Angeles, also writes for Kiplinger’s and CBS MoneyWatch.

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