Below is a link to valuable planning advice for seniors (or, really, for anybody).
Just how should we update these instructions to include what we have to do if we are also a “US person” in another country?
What should we do to make sure that a disabled member of our family (including those who may eventually be affected by an unfortunate accident, dementias, etc.) is properly looked after from whatever our estates will be?
Can we satisfy the laws of the country we live in and the country we left, the USA? If so, what will be the extra expense, administration for a US person living abroad?
As we age, the possibility increases that someone will have to take over our affairs if we are incapacitated or when we die. Many of us know where to find our important documents, but fewer have put all the information down in one place, so that our family or the executors of our estate can locate it easily, if something happens.
It takes some time and effort to create a loose-leaf binder – or even a file folder that will assist your family or the executor of your estate – or that of your spouse – in such a situation. But once you have accumulated all the information, you’ll feel confident that your affairs can be dealt with efficiently. Of course, you’ll have to update the binder every six months or so, but that shouldn’t take too much time.
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Here is a template for the overview in your binder or file:
It is probably a good idea to give your executor a copy of your “If Something Happen” binder or file
No matter what your age, the work you do now will help your survivors and executor(s) immensely, and they will be most grateful.
Good topic for discussion. And the IRS tries to target you in this area too. If you’re a covered expatriate (either because you meet the asset/tax threshold, or because you can’t certify five years of compliance), then Section 2801 applies to you. At any time in the future, any US person receiving a gift or inheritance from you which is greater than the gift tax exemption ($13k this year) has to pay tax on it at the highest estate tax rate. So if you want to leave property to US siblings, nieces & nephews, etc., you could have a problem.
http://www.law.cornell.edu/uscode/usc_sec_26_00002801—-000-.html
Thanks for posting this. Maybe someone here has an idea, but what if the opposite happens from what Eric mentioned? What if your parents are in the US and they pass away? How does the IRS tax an inheritance if you are still a US citizen versus if you have renounced? The renunciation guide website mentions it may be advantageous to wait until after you get the inheritance to renounce as it would not be subject to a penalty. But then in the mean time with FATCA coming into effect you have to account for every penny you have to the IRS. Seems like you get screwed no matter which road you take. Any ideas on this issue?
… and basically, do I wish every decision I make having to be weighed first by how I am affected being a US citizen in Canada (or another country)?
Do I continue to have my joie de vivre stolen by my remaining a US citizen — for indeed that spark, that joy, has gone from my life?
When again will I be able to read a book for pleasure, abandon myself to the day just for pleasure?
The answer for me is that each remaining moment in my life (for me at 68 with my husband of 71) and perhaps yours (whatever your age) is indeed precious and not to be wasted.
I want my life back and I want to deal with all of my decisions, big or small, based only on the reality of my life here in Canada (thank whatever luck it was that brought me here)!
I have the same issue that Zucchero has, that is possibly receiving an inheritance from the US, but I have another question on top of that – Wouldn’t you fall back into the IRS tax net if you receive an inheritance involving property and some bank accounts even if you had already renounced citizenship? I’m almost inclined to beg anyone with any intention of giving me anything to disinherit me…
A bit of discussion on estate planning…
One can see that, aside from the issue of estate tax, dealing with a deceased U.S. person’s taxes upon their death can be a nightmare for estate trustees if the deceased failed to file his or her U.S. tax returns in previous years. This will inevitably result in an onerous estate administration for the estate trustee and may have disastrous results for the beneficiaries. Also, an omission of the estate trustees to consider the U.S. estate tax and failure to ensure the deceased’s tax record is in order may result in the estate trustee being personally liable for any taxes owed.
http://ottawalawyersconnection.com/2011/03/28/tax-obligations-of-u-s-citizens-living-in-canada/
http://www.pwc.com/en_US/us/private-company-services/pdf/gyb_vol_60_estate_planning.pdf
http://www.bhlaw.com/webfiles/Yegorova_tax_Estate_Planning_Issues.pdf
http://www.taxandestateplanning.com/2011/12/articles/us-taxation/us-citizens-resident-in-canada-common-circumstances-where-us-tax-may-be-payable/
@ Don Pomodora
Even if you renounce, you can inherit as you describe.
you would have to file a 1040NR for any US-source earnings. This will become a problem for me as I have 2 accounts still in the US from my inheritance. If I leave them as they are, no big deal, each has to issue a distribution annually. The problem is, even having renounced, I don’t trust what will come so I am thinking of moving them up though I will get hit with more tax by taking them out early.
The two things I am very grateful in all of this is that I received the inheritance before renouncing and for having gone forward to get citizenship here.
I have the same question as Zucherro and DonPomodoro: When my parents pass away (hopefully years from now) will I, as a former US citizen, be subject to additional tax on any inheritance from them? I’ve looked for info a few times on the web but I can’t quite figure it out.
Quite a detailed discussion on this subject:
http://www.maximadvisors.com/knowledge-library/the-world-of-estate-planning-for-US-expatriates.html
“In this author’s long-held view, an area that is often overlooked by U.S. expatriates and their advisers – in part due to the ever-pressing needs of dual-country, complex income tax compliance requirements – is the wider, and potentially much more significant issue of estate planning in the cross-border context. In a sense, one can see income and estate tax issues as a sub-set of a far broader spectrum of estate planning concerns. Unfortunately, many find themselves bogged down in the annual (and growing) thicket of income tax compliance, while missing the bigger picture.”
I also have the same question as Rod, Zuchy and Donny! If I eventually renounce then subsequently inherit a few hundred thousand dollars from my USC parents, would I lose a substantial amount of this to anomalous US taxation and/or penalties??
It begins to occur to me that I’m going to be screwed somehow or other, no matter what I do. Of course it’s embittered me but life’s too short to dwell on these injustices. I’m beginning to think that my peace of mind is more important than worrying about a possible future inheritance; after all, if my mother wound up in a nursing home or my Dad died before my stepmother with her remarrying, I may not inherit much of anything anyway.
No inheritance in my future, but I would like to pass a little something to one of my brothers still in the US when I’m gone.
I absolutely want hard-earned savings that I’ve accumulated, what’s to spare after my husband and I have used it in our retirement, to go to my children (thus my son’s RDSP), not robbed from them by the IRS.
My mom and dad are both gone, one in 2004, the other in 2005, and they had extremely little to pass on. How fortunate I feel that they do not have to witness this mess, although I’m pretty sure I’d have their support.
PwC discussion on US Estate Tax Exposure for US Citizens Living in Canada (updated Feb 28/2011)
“The interaction of US and Canadian tax rules can have important implications for US citizens living in Canada.”
http://psychcentral.com/lib/2007/future-planning-for-your-intellectually-disabled-adult-child/
“Nonetheless, your job as a parent isn’t over. Without a plan, your child could be emotionally traumatized by losing everything at once (parent, home, and all that is familiar) if you suddenly become disabled or die. Loving your child now means beginning the process of letting go. Your child needs your support in transitioning to whatever will come next. You need the peace of mind, and the relief, that can come with knowing that your child will be safe and cared for.”
And, how will his or her US tax compliance be continued? Is this what we want for our US disabled adult child living in another country for when we are gone. How can we plan this extra step?
I would have thought that in cases such as this that the IRS could make a special ruling. I would like to believe that even the IRS would acknowledge genuine cases of hardship.
There really should be a #13. that every estate planner should ask more than once, for those outside the boundaries of the USA: that same question the financial institutions outside the USA will ask — “Are you a US Person?”
12 Estate Planning Questions That Might Make You Squirm
Canada: Deceased Taxpayers and the Voluntary Disclosure Program Last Updated: May 12 2016, Practice Guide by Rotfleisch & Samulovitch P.C.
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I want to make sure I leave no tax obligations for my estate to deal with when I have passed on. Just what would CRA / Canada do in regard to deemed US tax obligations? Will or could my daughter and my son (who is entrapped into a US-deemed US citizenship) be robbed of my modest Canadian estate / their inheritance? This is one subject I have not seen discussed.
Calgary 411. The only thing you need do is to be certain your executor is not a US person and is familiar with your wishes..
CRA won’t do a thing to harm your children. Not in your wildest fears could you imagine any way for that to happen. Your children are only Canadian. No one thinks or knows anything else. They have no real or imagined US obligations. You have done wonders for your son. Be proud.of what you have done for him. Be calm.