Six mistakes people make when moving between provinces

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In the excitement of preparing to relocate for a new job or retirement, details with important financial repercussions can be overlooked, and it’s often up to the advisor in the new jurisdiction to untangle those mistakes and propose solutions.

Here’s what advisors say people often get wrong when they move between provinces or territories.

1. Failing to plan for a new income tax rate

When it comes to income taxes, what matters is where someone lives as of Dec. 31. That determines the tax rate that applies throughout the entire year – and different jurisdictions have very different rates. Working people, especially, need to prepare for the impact of a new tax rate.

“Moving from a province that has a lower income tax rate … some people could get a surprise bill for income tax the following April because not enough taxes were withheld in the first part of the year when they were living in another province,” says Andrea Andersen, financial advisor with Edward Jones in Calgary.

2. Failing to budget realistically for life in a new place

Moving between provinces may mean a new climate that requires new clothes and opens the door to new activities requiring specialized equipment, such as a boat or a snowmobile.

There are incidental costs people may not think about as well. For example, keeping an old phone number active in addition to a new one.

“I tell my clients that it takes two years to really establish a new budget,” says Jeanette Boleantu, senior wealth advisor at Marda Loop Financial Group with Assante Financial Management Ltd. in Calgary. “There are always additional costs as you adapt [so] be aware that you need an additional cash reserve.”

3. Failing to account for different health care coverage

Health care is a provincial responsibility, which means what’s covered in one province isn’t necessarily covered in another. In addition, the transition between provincial health care plans isn’t always seamless.

Private insurance can top up coverage and bridge any gaps.

“Even if someone is simply looking to buy real estate in another province and leaves for a period of time … they should have travel insurance between provinces [because] not all expenses are covered by all provinces,” adds Peter Ficek, president of Terra Firma Financial Inc., headquartered in Calgary.

4. Failing to keep up credit

Credit can be damaged by an unpaid bill, languishing unseen in someone’s previous province. It can also be hurt by a gap in credit history, which Ms. Boleantu says can easily happen if everything in the new province is set up in one spouse’s name.

“I might sign the lease and set up everything in my name, and then have a joint credit card in which my spouse is the secondary [cardholder], but they may not have any more sources of credit in their name,” she says.

“Establish three sources of credit in each person’s name.”

5. Failing to arrange for a new advisor

People may assume they can continue working with their existing advisor after their move, but licensing is under provincial jurisdiction, so that may not be possible. In addition, important areas of financial planning such as family law and estate law are regulated provincially, so it’s important to have experts in place in the new location before the move.

A major reason Mr. Ficek arranged licensing and set up a branch of his practice in the Okanagan in B.C. was because he saw how many people were moving to the area without enlisting the support of a local advisor.

An advisor, he says, can serve as a quarterback, connecting recent arrivals to the other professionals they need as they establish themselves in their new community.

6. Failing to assess the impact on long-term plans

When people move to a place with a higher cost of living, provincial tax rate, or real estate transfer tax, for example, it can have a significant impact on their financial plan. Understanding whether a move will affect longer-term goals is essential.

“That transition time [alone] can be very expensive, so [it’s important to] understand where that extra cash flow comes from in their financial plan, and what it does to their overall financial picture,” Ms. Andersen says.

“What do the short-term costs [mean for] their retirement?”

How advisors can help

A basic inventory of all the components that make up a client’s “financial DNA” can help advisors identify any missing pieces in a client’s relocation plans, Ms. Boleantu says.

“You can catch all that if you just systematically go through it,” she says.

She adds that advisors can help attach newly arrived clients to their communities – for example, by telling them to think about which networks they’ll join, whether that’s a religious group, gym, or local college offering continuing education classes. That’s especially important when one spouse is driving the move and the other is following and less committed to it. It’s best, financially, if both enjoy the move and the marriage sticks.

“Moving is expensive. Moving twice is even more expensive. And divorce is even more expensive,” Ms. Boleantu says. “You want to address that social integration with the same attention that you pay to your taxes and your insurance. And don’t just assume because you’re moving to a place in Canada … that it’s going to be the same culture.”

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