A Case Study in Cross-Border Estate Planning: How one Canadian resident consolidated her late U.S. father's three inherited IRAs, preserved his Roth IRA under its own tax-free structure, and worked through the newly finalized 10-year RMD rules, before the missed-distribution penalty relief expired.
The Situation
When her father passed away, Maria (name changed for privacy) found herself managing an estate that spanned two countries. She had lived in Vancouver for over a decade, but her father had spent his career and retirement in the U.S., and had done what many diligent savers do: opened IRAs at a few different institutions over the years as jobs and advisors changed.
As his sole beneficiary, Maria inherited four separate accounts: three traditional IRAs and one Roth IRA, spread across three U.S. custodians. On top of grieving her father, she now had to figure out how to administer accounts she couldn't easily access from Canada, each with its own paperwork, its own distribution rules, and its own advisor relationship - or lack of one.
The Challenge
Maria's situation raised a few common but important questions for a cross-border beneficiary:
- Administrative complexity. Three custodians meant three sets of forms, three login portals, and separate distribution calculations to track every year - each with its own risk of error or missed deadline.
- A Roth IRA with different rules than the rest. The Roth followed a different distribution regime than the traditional IRAs, and it couldn't simply be folded into the same consolidated account as the others - Roth and traditional dollars can't be commingled given their different tax character. Left unaddressed, it risked becoming a fourth account managed in isolation, with its own separate rules easy to lose track of.
- The temptation to simplify by cashing out. Many Canadian beneficiaries in this position are told the easiest path is to collapse the IRAs and take a lump-sum distribution. That may solve the paperwork problem, but it also triggers full taxation on the entire inherited balance in a single year - accelerating a tax bill she didn't need to take all at once.
- Cross-border account access. Not every U.S. custodian is set up to service a beneficiary who resides in Canada, which can leave inherited accounts in limbo or force a distribution simply because the institution isn't equipped to maintain the cross-border relationship.
- A 10-year distribution window, not indefinite deferral. As a non-spouse beneficiary, Maria isn't able to simply leave the account alone and let it grow untouched. The account must be fully distributed by the end of the tenth year after her father's death - and, because her father had already reached his own required beginning date, she also needed to take an RMD in the years within that window, not just a single distribution in year ten.
- No side door through an RRSP. An inherited IRA can't be rolled into a Canadian RRSP. The relevant tax provision requires the plan to relate to services the beneficiary personally performed as a non-resident of Canada - and an inherited account relates to the original owner's employment, not Maria's.
The Solution
Working with her Raymond James (USA) advisor, Maria was able to:
- Consolidate the three inherited traditional IRAs into a single inherited IRA, held under one custodian and one account structure. This eliminated the need to track separate RMD schedules and paperwork across multiple institutions.
- Calculate and satisfy a single annual RMD on the traditional IRA, rather than reconciling distribution requirements across three separate accounts - reducing both the administrative burden and the risk of an inadvertent missed year. This mattered more than it once did: the transition relief that had shielded beneficiaries from a missed-RMD penalty expired at the start of 2025, so skipping a required year now carries a real penalty, not just a larger distribution later.
- Move the inherited Roth IRA to the same advisor relationship, kept as its own account given its different tax treatment, but no longer sitting untracked at a separate custodian. Because Roth account owners are always treated as if they died before their required beginning date, no annual RMD is required on the Roth at all - only full distribution by the end of the 10-year window, on Maria's own schedule.
- Maintain both inherited accounts as a Canadian resident for the duration of the 10-year window, rather than being forced into an immediate full cash-out. Because Raymond James is positioned to serve cross-border clients, Maria was able to keep the remaining balances invested and spread her distributions - and the resulting tax recognition - across the full window instead of compressing it into a single year.
What Changed Under the 2024 Final Regulations
For several years after the SECURE Act, it was genuinely unclear whether non-spouse beneficiaries subject to the 10-year rule also had to take annual RMDs within that window, or only a single distribution by year ten. Final IRS regulations issued in 2024 settled the question: if the original account owner had already reached their required beginning date - as Maria's father had - annual RMDs are required throughout the 10-year period, with the account fully emptied by the end of year ten. The one exception is where the owner died before reaching their own required beginning date; in that case, no annual amount is required and only the year-ten deadline applies. Because Maria's father had already begun taking distributions, her consolidated IRA was subject to the annual requirement from the outset.
How the Annual RMD Was Actually Calculated
Once it was established that Maria owed an annual distribution on the traditional IRA, her advisor walked her through how that amount is determined each year: her age in the year following her father's death is used to find a life expectancy factor from the IRS Single Life Expectancy Table, and that factor is divided into the prior year-end account balance to produce the RMD. The factor is then reduced by one each subsequent year, so the required percentage of the account rises gradually as the 10-year window progresses. None of this applies to the Roth IRA, which only carries the year-ten full-distribution deadline.
It's also worth noting who these rules apply to differently. Maria, as an adult child, falls under the standard 10-year rule with annual RMDs. Eligible designated beneficiaries - a surviving spouse, a minor child of the account owner, a disabled or chronically ill beneficiary, or a beneficiary not more than 10 years younger than the original owner - can still stretch distributions over their own lifetime rather than being bound by the 10-year window, though a minor child moves onto the 10-year rule once they reach the age of majority.
One planning point her advisor flagged for the years ahead: because withdrawals are taxable income in both the U.S. and Canada, spreading distributions deliberately - rather than only taking the bare minimum some years and a larger amount in others - helps manage which tax bracket that income lands in on both sides of the border.
A note on preserving the Roth's tax-free status. A Roth IRA doesn't get the same automatic deferral in Canada that a traditional IRA does. Absent an election, the CRA treats the Roth's undistributed internal growth as income to Maria on a current, annual basis - the tax-free character it had in the U.S. doesn't carry over by default. To prevent that, Maria's advisor made sure she filed a one-time, irrevocable election under the Canada-U.S. tax treaty, which maintains the Roth account’s tax-free growth and tax-free withdrawals. If the election is missed, the CRA could treat the Roth as a normal taxable brokerage account. The election has to be filed with the CRA's Competent Authority Services Division by the filing deadline that applies to the year she became entitled to the account, and it comes with one hard rule to watch going forward: no further contributions can ever be made to the Roth while she's a Canadian resident, or the election's protection is compromised. You can read more about this topic here.
The Outcome
Instead of an unwanted lump-sum tax bill and a fragmented set of accounts to manage from abroad, Maria now has a consolidated inherited traditional IRA with one clear RMD calculation each year, and a separate inherited Roth IRA with no annual requirement at all - both tracked against the same 10-year deadline, both visible to her through a single advisor relationship. She recognizes income from the traditional IRA annually rather than all at once, and has been able to plan around exactly how much beyond the required minimum to withdraw, and when. The Roth gives her additional flexibility on top of that: because qualified Roth distributions are tax-free, she can time withdrawals from that account around whatever gives her the most room within her tax bracket in a given year, without adding to her taxable income.
The other piece she had to budget for was the cross-border tax gap. What her U.S. custodian withholds isn't her actual Canadian tax bill - Canada is generally the higher-tax jurisdiction on this income, so the foreign tax credit absorbs the U.S. tax paid, but it doesn't cap her total liability at the U.S. rate. The difference is owed to the CRA with her Canadian return. Planning for that top-up in advance, rather than being surprised by it at filing time, was as important to the outcome as the consolidation itself.
For Canadian residents who inherit U.S. retirement accounts, this kind of consolidation isn't always offered - or even known to be possible - by every custodian. Having a cross-border advisory relationship in place made the difference between an administrative headache with an accelerated tax bill, and a manageable, tax-efficient path through the 10-year window.
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About Snowbirds Wealth Management
Gerry Scott, Dean Moro, and Carson Hamill are Portfolio Managers with Snowbirds Cross-Border Wealth Management.
Snowbirds Cross-Border Wealth Management, a firm specializing in financial planning and investment management for individuals with ties to both Canada and the United States. They work closely with Americans living in Canada and Canadians residing in the U.S., helping clients navigate the complexities of cross-border investing, taxation, and wealth management.
Licensed in both Canada and the United States, they provide integrated investment and planning strategies designed to help clients manage their wealth efficiently while minimizing cross-border tax exposure.
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