New here, Selling my Businesses, Need Advice Please

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
Post Reply
fight_prof
Newcomer
Newcomer
Posts: 2
Joined: 25 Jul 2017 17:44

New here, Selling my Businesses, Need Advice Please

Post by fight_prof »

Hi everyone,

I came over here from the Bogleheads forum. I originally posted a similar post, and thought I had my plan mapped out but my Canadian CPA threw me a curveball. So any help is greatly appreciated.

I'm 37, married with 2 young kids and live in California. We moved here from Canada in 2014. Hoping to get some advice here.

I have 2 businesses that will be sold very soon. After taxes I should have $1.2-1.5M cash on hand.

I'll still be working and such, but I'd like to get my money working for me. I'm embarrassed to say that I have a decent amount of cash on hand currently that just sits in our checking/savings doing nothing.

Based on my reading on Bogleheads, my plan was to invest in a Vanguard fund, and I was actually very close to doing so but my Canadian CPA as mentioned made me change my mind.

Basically, I currently have about $415K in an RBC bank account in Canada. The kicker is, this money is in my Holding Companies name. It is after tax revenue from my operating businesses. I have another 160K in cash personally in the US.

That 415K just sits there and is not doing anything. My CPA informed me that if I were to transfer that out of the corp and into an investment vehicle like Vanguard, it MUST be in the holding companies name or I'm going to be subject to tax AND withholding tax. So he said the solution would be that the investment account must be in the Canadian holdco's name. Well Vanguard told me they can't do that.

So what I am looking for is a solution with low expense ratios that is somewhat managed, at least in the beginning. I was intending on working with Vanguards Advisor service since the rates are comparatively low and its a fairly logical moderate risk plan they had laid out but now I can't do that. So I can avoid this immediate tax hit.

Within Canada, what sort of options would I have here to get this money working that would be a similar strategy? I'd be open to an advisor group only if the expense ratios are low of course.

I intended on also transferring some of these funds to my offshore trust but now that may not happen unfortunately.

Thank you in advance, any help is appreciated.
gobsmack
Contributor
Contributor
Posts: 447
Joined: 04 Sep 2015 13:16

Re: New here, Selling my Businesses, Need Advice Please

Post by gobsmack »

fight_prof wrote: So what I am looking for is a solution with low expense ratios that is somewhat managed, at least in the beginning.

...

Within Canada, what sort of options would I have here to get this money working that would be a similar strategy? I'd be open to an advisor group only if the expense ratios are low of course.
Congratulations on the sale of your business.

Once you complete the sale of your business, the $415k in the RBC account is only going to be about 25% of your total portfolio. So no need to rush. Take your time to figure this out.

If you are looking for a solution similar to Vanguard mutual funds, perhaps TD e-series funds would be your best pick. You have to also keep in mind the taxation rules that apply to investment income inside a CCPC. Your accountant can explain them to you.
fight_prof
Newcomer
Newcomer
Posts: 2
Joined: 25 Jul 2017 17:44

Re: New here, Selling my Businesses, Need Advice Please

Post by fight_prof »

OK great thanks a lot!
User avatar
ClosetIndexer
Contributor
Contributor
Posts: 267
Joined: 27 Feb 2012 02:20
Location: Vancouver, BC
Contact:

Re: New here, Selling my Businesses, Need Advice Please

Post by ClosetIndexer »

ISTM the simplest thing would be to open a self-directed brokerage account in Canada (at RBC or elsewhere) and buy Vanguard ETFs. They have ETFs matching all their major mutual funds, so your Vanguard advisor can probably help you build it into your overall portfolio. And the expense ratios of Vanguard ETFs are considerably lower than those of comparable Canadian mutual funds. (Even TD e-funds, which are the most reasonable.)

I second the advice of talking to your accountant or a tax lawyer about holding investments within a CCPC. The rules surrounding that are changing in the near future, which might affect what you want to do.
Post Reply