Transferring RRSP While Non-Resident

[DerekW]

Hello,

I have a problem with my RRSP.

I moved to North Carolina from Canada a year and a half ago with the understanding I could keep my RRSP for the duration of my 6 year stay in NC.

However, a few months ago, Questrade locked my RRSP and told me to remove all funds. I had a long email exchange with them, and they won't back down. They say it's not an issue of law, it's an issue of Questrade not being "registered" in NC. All of this is particularly unfortunate considering I checked with a Questrade rep to make sure I was ok moving to NC before I even moved. They said keeping the RRSP would be fine.

But anyways, my question is whether anyone knows of a way to transfer an RRSP to a new bank while being a non-resident. If I'm not able to do this I'll have to withdraw and pay terrible taxes on the money. Or can anybody think of any other possible solution that doesn't involve me paying 30% tax on my money?

My understanding is that transferring to an IRA is impossible, but correct me if I'm wrong.

Thanks very much for any help,
Derek

[Cdninga]

I've been a US resident for over 30 years and I transferred my RRSP from BMO to Scotia about 12 years ago with no issues.

[nelsona]

TD Direct accepts RRSPs for US residents from all states.

[chelavnzuo]

I'm in the same situation, but it seems I can not open a TD Direct account as a non resident in Canada.

[DerekW]

Shoot. I was planning on trying TD in the coming days. I'll let you know if I stumble on a bank that does allow it.

[nelsona]

i was non-residengt when I opened mine. You need to get the right agent. Tell them you are TRANSFERRING an RRSP, not simply opening one.

[chelavnzuo]

Does TD direct allow us to trade freely in the RRSP account with the existing balance or just simply keep the account but you can't sell one equity and use the proceed to buy another?

[chelavnzuo]

The reason I'm asking is because BMO IL allows me to keep the account while I'm residing in the state of Oregon, but I can only sell equity and maintain cash, not reinvest in new equity.
They also said if I moved to the state of Washington, then there's no restriction on buy and sell in the RRSP account. There are certain states (unfortunately Oregon included) do not have treaty with BMO IL (or Canadian brokerages in general?) so they can't allow me to trade.
Does this apply to TD direct as well? or TD direct allows to make trades in the RRSP account freely in all US states?

[nelsona]

BMO is correct that a very few number of states have restrictions. But when you call TD ask them if it is because you are in OR, or is it general. If they say general, you are talking to the wrong person. Ask for someone that deals with US clients.

"Selling and maintaining cash" is essentially a frozen account, which almost all CDn self-directed brokerages will allow. But you want the account with no restrictions.

In the early 00;s when all this was being decided (at one point, for about 2 years no US resident could trade in an RRSP). once the SEC said ok, then there was a detailed list of each states' initiatives to legislate permissions for RRSP holders, but I haven't seen the list for a few years. It was thought that all that were going to change had been changed, and the few holdout states were not going to budge.

[chelavnzuo]

I called TD direct and the agent told me RRSP account can be maintained in all US states. I specifically asked about OR and told them one of the Canadian brokerages doesn't allow it but again the TD agent told me there's no restrictions in TD.

My question is when you say "the few holdout states were not going to budge", does that apply to all Canadian brokerages or just certain ones that don't have "treaty" with these states?

Basically I'm trying to determine whether I should just cash out pay the tax and get over with it, or in-kind transfer to TD from BMO if indeed TD can allow no-restriction RRSP account for Oregon resident.

Thanks!

[nelsona]

Depending on your age, I would consider converting to RRIF, and taking out 10% per year. This will reuce the Cdn tax (which is the predominant tax you will pay; the US tax will be much less on top of it).

[chelavnzuo]

Thanks Nelsona,

I'm nowhere near retirement and I'm currently living in Oregon so I don't think RRIF is an option.

Do you happen to know if "the few holdout states were not going to budge" applies to all Canadian brokerages or just certain ones that don't have "treaty" with these states?

[DerekW]

Chelavnzuo, it seems to me at this point that it is up to the broker whether they want to register with particular states. My contact at Questrade informed me after consultation w/ various higher ups that the reason Questrade was freezing me was simply that they weren't "registered" w/ North Carolina, w/ implication that they could be registered if they wanted to be. He sent me a document (link below) that outlines the three different models for "snowbird" investors. Turns out Oregon and NC are both Model 3, so we're in the same boat.

http://iiac.ca/wp-content/themes/IIAC/r ... 02012a.pdf

[chelavnzuo]

Thanks Derek, I will also keep you posted if I find any brokerage firms that have treaty with the model 3 states. It seems TD direct might be our best bet for now, the only thing they required from me is to physically go back to Canada, book an appointment at the nearest branch and sign some documents.

One quick question, when your Questrade account is frozen, are you still able to sell equities/EFTs and hold cash but just not reinvest, or you simply can't even log in?

[nelsona]

A little history for you folks:
Back in late 90's SEC stated that RRSP trading was not permitted. This applied nationwide.
The RRSP industry lobbied HARD for a couple of years, first on the SEC, which eventually issued an order permitting trading, but required each state SEC to come up with some form of regs.
Each state the decided on how, when, and what it would cost brokers to become "compliant" with state regs. All but a handful of states made it legal, by 2003.

That then put the ball in each Cdn brokerages court. Which states, if any would they become compliant.
Most, since it had to be a brokerage firm, could not qualify (These would be the mutual fund arms of the banks for example, who sell only their own funds)
Others, simply didn't bother at all, and their clients had to move their accounts.
Some. cherry-picked which states they would comply with, based on the number of potential clients they had: Florida, California, NY were prime candidates. Fly-by and small states were ignored.
Others, like TD Waterhouse (now TD Direct), went all-out and got licensed in every state possible,
The firms which do take US clients, only have a small number of licensed individuals, and the rest are forbidden to even discuss anything with US individuals, which is why you sometimes call a firm that can take on clients, and get the flat refusal. Even with TD, one usually has to get through 2 or 3 unknowledgeable people, to get to the right office/individual who knows the correct info.