Recently,
JP Morgan announced they would be closing all investment accounts for non-US residents. The affected clients are being notified by mail that they have until November 1
st 2018 to move the accounts out of JP Morgan International Financial Services. If the accounts are not moved by this date the accounts will be liquidated and a distribution will be sent.
Investment accounts encompass retirement accounts such as IRA, SEP IRA, ROTH IRA, etc. Given the rules associated with distributions of these accounts, this could cause a huge tax problem if unaddressed.
This news is expected to affect nearly $3b in client assets. While this should not come as a huge surprise for those following the industry, this will catch a number of clients off-guard and possibly ill-prepared.
The
first thing affected clients need to do is find another US custodian who can open accounts for a non-US resident (please
email me for a list according to account type and residency). The
second is to call JP Morgan International Financial Services at 212.623.1000 and make sure they have your current address. This ensures that transfer process to the new custodian is done in a timely manner.
Clients with IRA/SEP IRA/ROTH IRA – If you do not get a corresponding retirement account opened at another US custodian by November 1, your account will be liquidated, and the distribution sent to your last address on file (less any early withdrawal penalty or withholding tax based on country). ** If this happens, you have
60 days to deposit those funds into a corresponding retirement account with a US custodian, or they will be fully taxable to you as income in 2018.
Clients with
Inherited
IRA/ROTH/SEP IRA – Due to the nature of inherited accounts, you
must have an inherited retirement account opened at another custodian before you can do the transfer. If the distribution is sent directly to your address you do
NOT have the 60-day rule. Inherited accounts must transfer from trustee to trustee. Again, this could become a fully taxable event for 2018. If for some reason you do receive a distribution, do not deposit the cheque and consult a cross-border financial advisor to discuss your options.
Traditional Brokerage Accounts
: Most US custodians do not allow brokerage accounts for non-residents due to SEC guidelines. However, depending on the type of securities in the account, the client could open a brokerage account in their current country and have the securities transferred in-kind to their current country’s version of brokerage account. Note, most mutual fund companies no longer allow a transfer into an account with a non-resident address. Any securities that do not transfer in kind, must be sold, and would be a deemed disposition (taxable event).
Cross-border rules can be complex from both a tax and estate standpoint, and every situation is different. We specialize in helping clients in both Canada and the US navigate the rules on both sides of the border, feel free to reach out with any questions.
Chris Stooksbury
Toll Free - 1.844.558.8752
