I have today received a letter dated May 16, 2012, from the Honourable James M. Flaherty, Minister of Finance. I had no idea why I did not get a reply to my correspondence when I knew others had, so I am very pleased to finally get Mr. Flaherty’s letter. It does not give me what I’d like to hear, but it stops my guessing regarding the use of the beneficial Registered Disability Savings Plan for my son and the disabled family members of other such Canadian-American families.
He has confirmed that the RDSP (as well as the TFSA and RESP) are not recognized in the Canada-United States Income Tax Convention but that my concerns on this matter will be considered when the Convention is next open for renegotiation.
Mr. Flaherty has made it clear that the RDSP, which is used as a retirement tool (versus using a Registered Retirement Savings Plan) for many disabled persons,
as: Money paid out of an RDSP will not affect a person’s eligibility for federal benefits, such as the Canada Child Tax Benefit, the Goods and Services Tax credit, Old Age Security or Employment Insurance benefits. In addition, RDSPs will have little or no impact on provincial and territorial social assistance payments. For further details, contact your provincial or territorial government.
should only be used if the Beneficiary or the Holder of the RDSP is NOT also a US Person. It is not a beneficial tax-saving tool when such persons are US Citizens in Canada. Such persons are by virtue of their US citizenship, Second-Class Canadians, discriminated against and deprived of saving for their retirement by the use of an RDSP so their federal and provincial benefits will not be affected (vs the use of RRSP). It is apparent these Second-Class disabled Canadians must miss out (or be subject to US tax) on the following:
To encourage savings, the Government of Canada introduced the Canada Disability Savings Grant and the Canada Disability Savings Bond.
The Canada Disability Savings Grant is a matching grant that the Government deposits into the RDSP. Each year, the Government will match contributions made by paying up to $3 for every $1 paid into the plan, depending on the amount contributed and on the beneficiary’s family income. The Government will deposit a maximum of $3,500 each year, with a lifetime limit of $70,000. Grants will be paid into the RDSP until the year the beneficiary turns 49.
For example
If the beneficiary’s family income is less than or equal to $83,088*:
• The Government will deposit $3 for every $1 on the first $500 contributed to the RDSP and $2 for every $1 on the next $1,000.
If the beneficiary’s family income is over $83,088*:
• The Government will match $1 for every $1 contributed on the first $1,000.
* Income amounts will be updated yearly based on the rate of inflation.The Government of Canada will also pay a Canada Disability Savings Bond of up to $1,000 a year to low-income and modest-income Canadians. The good news is that no contributions are required to receive the bond; simply open an RDSP and fill out an application form at the financial organization where you have your RDSP. Bonds will be paid into the RDSP until the year the beneficiary turns 49. There is a bond limit of $20,000 over the beneficiary’s lifetime.
For example
If the beneficiary’s family income is less than or equal to $24,183*:
• The Government will deposit $1,000 each year into the RDSP.
For beneficiary family incomes between $24,183 and $41,544*:
• The Government will deposit a portion of the $1,000. As your income increases, the bond amount paid decreases.
* Income amounts will be updated yearly based on the rate of inflation.
From Mr. Flaherty’s letter to me:
Thank you for your correspondence of November 14 and 21, 2011 and January 4, 2012 regarding the taxation by the U.S. of income earned by dual Canadian-American citizens resident in Canada, as well as the requirement for these individuals to file tax and information reporting forms in the U.S. Please excuse the delay in replying.
In your correspondence, you draw attention to financial interests held in Canadian deferred income arrangements, such as Registered Disability Savings Plans (RDSPs), Tax-Free Savings Accounts (TFSAs), and Registered Education Savings Plans (RESPs). While I cannot comment on the specifics of your situation, I would like to make the following general remarks.
Canada and the U.S. have agreed in the Canada-United States Income Tax Convention to exempt from withholding tax dividends and interest paid to a trust, company, organization or other arrangement operated exclusively to administer or provide pension or retirement benefits, such as a Registered Retirement Savings Plan or a Registered Retirement Income Fund. Accordingly, when the above requirements are not met, dividends and interest are subject to income tax.
Since an RDSP, a TFSA or an RESP can be set up to pursue financial objectives other than he exclusive provision of pension or retirement benefits, they do not meet the criterion set out above and, consequently, they do not receive an exemption from U.S. income tax under the Convention.
Your concerns on this matter will be considered when the Convention is next open for renegotiation.
The rest of the letter relates to our requirement to file a Foreign Bank Account Report (FBAR) and what has been reported in the Finance Minister’s correspondence to others. It also highlights the December 7, 2011 IRS guidance on U.S. tax return and FBAR filing requirements for citizens living in Canada and other countries.
It reiterates that penalties imposed by the IRS under FBAR will NOT be collected by the Canada Revenue Agency (CRA) on their behalf and that the CRA does not and will not collect the U.S. tax liability of a Canadian Citizen if the individual was a Canadian Citizen at the time the liability arose (whether or not the individual was also a U.S. Citizen at that time).
The Fact Sheet was enclosed for information purposes only, not to be viewed as tax advice.
It is nice that you heard back but definitely a bit of a downer. I would not be pleased, for sure.
Am not at sure I understand all the info about Canada Disability Savings Bond/ and Grant. It sounds like they are deposited into an RDSP which isn’t going to help you at all.
In addition to this and all the other recent hoopla (Saverin, the RCMP “easing us” into the idea that American law enforcement will be acting on our soil) – I begin to feel rather uneasy again.
@Calgary: That is huge disappointment–but not a surprise. As you said, Canadians of American origin or heritage are being treated as second class Canadian citizens–especially ones with disabilities who were born here. What a travesty this is for this superb program and for Canada as a whole.
These words from Flaherty don’t exactly instill confidence: “Your concerns on this matter will be considered when the Convention is next open for renegotiation.” IT seems like quote the brushoff. When will the treaty be renegotiated? What does “will be considered” mean? By whom? Why won’t he do anything in the meantime to protect the rights of Canadian citizens with disabilities to equally participate in financial planning regardless of national origin of a parent?
Since my form letter response from Flaherty a few months ago, I have sent him three e-mails requesting he: Advise Canadian banks they must adhere to Canadian laws and Advise Canadians that Canadian laws will not be changed to meet the demands of a foreign government. I have tyhad absolutely no response from him.
As Tiger says, over the past few months, Flaherty’s “silence has been deafening.”
That may be a good thing or a bad thing, but at the moment, I’m losing hope that it is good thing.
While our hearts race with anxiety about what lies ahead, the Canadian government moves at the pace of a sloth. I warned Flaherty in my e-mail (no response) that the effects of a future FATCA could produce a further strain on the Canadian healthcare system. Something always breaks when under stress. The deafening silence is not acceptable. If the intention is to eventually throw us to the wolves, at least give us fair warning. I haven’t much sympathy for a government which seems to have so little sympathy for the disabled who are as Canadian as you or I, except for one small identifier. They could fix this glitch and quickly too if they wanted. In the meantime, calgary411, I hope it helps a little that we are on your son’s side and thanks for explaining the RDSP. It’s a good Canadian program and should not be undermined by the intransigence of the IRS.
@calgary411, thank you for sharing the letter re RDSPs (and related ‘forbidden by the US’ Canadian TFSAs, RESPs, etc.). This is blatant discrimination against those Canadians and permanent residents with disabilities, (and against all those who could qualify to use the TFSAs and RESPs – and soon, the PRPPs for retirement savings). It creates and disadvantages distinct classes of taxpayers, citizens and residents in Canada who pay Canadian taxes just like anyone else, but cannot equally avail themselves of savings (and matching programs) that others can benefit from. I cannot see how this should remain unaddressed until some potential and uncertain future treaty talks.
We all know how long the problem with RRSPs has been around – and there is only a partial and complex ‘fix’. The impetus to change the situation, seems to be – ironically, from US professionals, not Canada (see: http://hodgen.com/irs-meetings-today-about-rrsps/ and http://www.accountingtoday.com/news/IRS-Asked-Provide-Guidance-Foreign-Retirement-Accounts-62725-1.html ) Now that compliance and enforcement are continuing to be ramped up by the US – applied in an extra-territorial manner to those in Canada’s sovereign land, and that of other countries – it is even more urgent that the Canadian government meets this head on.
How can Canada AFFORD to have a million or more citizens who cannot avail themselves of Canadian federal programs and grants – because of US demands? Obviously Canada believes strongly that RDSPs, TFSAs, RESPs, and the proposed PRPPs provide a significant social benefit – not just to the individuals that hold them, but to Canadian society as a whole. Otherwise, they would not exist and be blessed with favourable contribution and taxation rules. Why should Canada allow discrimination, and to indirectly support and subsidize US extraterritorial citizenship based taxation within it’s borders? Particularly when renouncing is impossible for those with particular cognitive disabilities, or those who cannot satisfy the IRS or pay through the nose to obtain 5 years of PTIN certified filings – many or most of which will result in zero US tax owed. This is an outrage.
@nobledreamer, Blaze, Em, badger and recalcitrant (who I have heard from by email since we share this discrimination of our disabled family members) — thank you for your words of support.
This is an outrage for many, in fact all of us, for whom taking part in tax-protected Canadian (or other countries’) savings plans for its citizens is detrimental as the US considers such benefits taxable and reportable with extra forms such as 3520 and 3520A for “foreign trusts”, FBARs, FATCA’s 8938.
I will continue to advocate on this issue for my family, for other families with disabled family members and for, essentially, all of us who are rendered second-class citizens of the countries of our residence.
@ calgary411
When I said they could fix this and quickly I meant it. Why can’t the Canadian government issue your son an “honorary” Canadian birth certificate — born in Ottawa for instance? (He is after all born in the hearts of all sympathetic Canadians.) So there you go, problem solved and the IRS is out of his life forever. It just takes some creative, lateral thinking. When there is an extraordinary injustice it seems perfectly reasonable to me to come up with an extraordinary solution.
@calgary411
Thank you for posting the letter from our Minister of Finance. But how disappointing it is – how is it possible that all disabled in Canada are not treated in the same manner. Isn’t that what we, as a country, are all about?
As Blaze said above, I have found Flaherty’s silence over the last few months absolutely deafening. I realize that there might be things going on in the background between our two countries. And that they may need to keep those things out of the press until agreements are reached.
However, I become more doubtful that all things will work out, when it is reported (as it was on another thread this week) that a Canadian insurnace company (Sun Life), now has on its application – “Where were you born” – I believed that was an absolute NO/NO in Canada. Other articles we have read here since the May 15th meeting in DC have indicated that ‘the Canadian government is staying out of the fray’.
Of the many letters that I wrote to government officials during the last several months, the response that I received that seemed the most heartfelt and thoughtful was from Elizabeth May, Leader of the Green Party. She herself as a born in America, Canadian is caught up in all of this. In her letter to me, she asked that I keep her posted through her constituency office. I wonder if letters to her might garner some response and also if she were made aware of the particular difficulties of Canadian disabled who happen to have American citizenship.
Letters can be sent to:
Elizabeth May, O.C., M.P.
Member of Parliament
Leader of the Green Party of Canada
1 – 9711 Fourth Street
Sidney, BC
V8L 2Y8
@Em: Calgary’s son WAS born in Canada. He does not need an “honorary” Canadian birth certificate. He has a real one. IRS considers him a US citizen because his parents were born in US. They will not allow him to renounce because he does not have the mental capacity to understand its meaning because of his disability. Calgary cannot renounce for him legally–although she was legally required to register this Canadian born citizen for the selective service (military draft) when he was between the ages of 18 and 25 or face fines up to $250,000 or up to give years in prison.
I hope I have all of that info correct, Calgary. We have come to know this travesty well through you.
@Tiger: My experience with Elizabeth May has been different. I have not even had an acknowledgment of my letters or e-mails to her.
@ Blaze
Okay now I get it but still I don’t. Canada should claim him solely as our own (upon calgary411’s request as legal guardian) and make some legislation saying hands off America! It would be our citizenship rules against theirs. We may be a mouse but we should still be able to roar at an injustice.
I always get a good response from Elizabeth May. I seem to be able to connect with her but anything I send to Harper’s office must be too politically incorrect for them to acknowledge.
@Em: Agree. It is a total mystery as to why this government–which established the absolutely brilliant and superb Registered Disability Savings Plan–would not expect and demand every Canadian have the exact same rights to participate in and benefit from it. They should be advocating even stronger for someone with a developmental disability who cannot advocate for himself or herself (which is the reason Calgary is doing it on her son’s behalf).
Same dilemma with TFSAs and RESPs. Check out this article from Globe and Mail last year about how education savings plans in Canada are affected for two teenage girls who never lived or worked in US and never had US passport. I don’t know what the final result was… http://www.theglobeandmail.com/globe-investor/personal-finance/tax-centre/us-tax-crackdown-hits-canadian-residents/article2067393/
Like you, anything I send to Harper or to Minister of Citizenship and Immigration, Minister of Foreign Affairs and my Conservative MP seems to fall into an abyss. . Same for Flaherty recently. Very discouraging.
@Blaze and Em,
Right, my son was born in Calgary to parents born in the US, as was my daughter. LOL — I’ve certainly been on this since the inception of Isaac Brock and many know my story well, the numerous times I’ve told it. I feel bad about that sometimes but then there are always new people who I can educate on this aspect. He was never registered with the US, does not have a social security number, was raised in Canada, never lived in the US or had ANY benefit from the US.
And, it is true that he, as any other US male, including those developmentally delayed with the help of a family member or friend, must register for the US military — another of their laws that apply to those considered US citizens in other countries. Who knows if they would / could come after him or me for that? The questions are endless.
The absurdity is endless — for those like my son on one end of the spectrum and Eduardo Saverin on the other end. I consider Eduardo has complied with US law and paying what he owes. He, too, wants to get on with his life and his business endeavours. Both Eduardo and my son (and others like them) are punished. My son for $0.00 owed; Eduardo Saverin for complying with the law in the tremendous amount he pays to the US but it still is not enough.
I would be glad for Canada to step in and say enough is enough; hands off. It would be not only for my son though and I don’t want special treatment for him — it needs to be for all that are likewise affected. And, I think there are / will be many.
Thanks, you guys!!
I have just thanked Finance Minister Flaherty:
Wonderful letter @calgary411
I think you were calmer than I would have been.
Only on the outside!!
@ calgary411
That was a perfect response … measured, respectful and calm but still making it clear that listening to Canadian’s concerns, reinforcing the still needed reassurrance and taking action as soon as possible are expected and the right thing to do. Well done!
@calgary411
You are to be congratulated. What a wonderful response. Shame on all of those that ignore our pleas and do not come forward to ease the minds and hearts of people like yourself and the many others who are law-abiding citizens caught in this trap.
@Calgary411, beautiful response to a very disappointing letter from Flaherty. Even if he doesn’t read it (not likely) someone in his office must, and surely it will evoke some sort of emotional response, how could it not? Maybe it will actually get someone THINKING!
@Calary411, What a Excellent Letter. Very well done!!
@Calgary
What grace, class and style! Hats off to you my friend!
Update:
I just came upon this, Canada’s Finance Minister James Flaherty responds to CARP (Canadian Association of Retired Persons) – Canada Continues to Press for Fair Tax Deal with US , June 15, 2012 (http://www.carp.ca/2012/06/15/minister-flaherty-canada-continues-to-press-for-fair-tax-deal-with-united-states/
This was published shortly after Minister Flaherty’s letter to me, referred to on this post.
Someone else may have picked this up; I wasn’t vigilant enough and haven’t noticed it at Isaac Brock.
FOR ME AND MY SITUATION — Thank you, CARP. Thank you, Minister Flaherty.
Minister Flaherty: Canada continues to press for fair tax deal with United States
Canada and the United States are neighbours, allies and friends. We share a common border and common values. One of those values is fighting tax evasion and ensuring that everyone pays their fair share.
Recently, the U.S. government introduced legislation called the Foreign Account Tax Compliance Act (FATCA), which will require non-U.S. financial institutions to enter into an agreement with the IRS to identify their U.S. account holders and report their account information to the IRS.
The U.S. also requires its citizens, including those living abroad, to file a U.S. tax return if they have income above the U.S. filing thresholds, and a Foreign Bank Account Report (FBAR) if they have more than $10,000 in non-U.S. accounts. These requirements apply to U.S. citizens resident in Canada, even if they are filing Canadian tax returns and paying Canadian income tax.
While we support fighting tax evasion and making sure everybody pays their fair share, our Government – like many – has concerns about the impact of FATCA and FBAR on Canadians.
For instance, many dual citizens affected by FBAR have complained they have only very remote links to the U.S. and a very limited knowledge of their tax reporting obligations to the U.S.
We recognize – and have publicly told the U.S. – that the vast majority of these dual citizens being targeted are honest, hardworking and law-abiding people – including many senior citizens – who have dutifully paid their Canadian taxes.
Their only transgression has been failing to file IRS paperwork that they were unaware they were required to file. These are not high rollers with exclusive offshore bank accounts looking to evade paying their fair share of taxes.
Faced with the knowledge they have an obligation to file U.S. tax returns (even if they most often do not actually owe any U.S. taxes) and FBARs, we appreciate that many dual citizens want to fulfill that obligation. But we also understand that the threat of large fines for simply failing to file a return they were never aware they had to file has become a frightening prospect causing unnecessary stress and fear among many honest, hardworking individuals.
As such, we have called on the U.S. government to look upon those individuals in Canada with leniency.
I am happy to report the U.S. government has listened to our concerns and the concerns of Canadians.
Last December, the IRS released new guidelines for U.S. citizens living in Canada and other countries for their U.S. tax return and FBAR filing requirements.
According to the guidelines, U.S. taxpayers who owe no U.S. tax are not subject to any penalties for a failure to file a U.S. tax return. In the case of a failure to file an FBAR, where the IRS determines that it was due to reasonable cause, there is no penalty. For more information, visit the IRS website.
We have also been clear that penalties imposed by the IRS under FBAR will not be collected by the Canada Revenue Agency (CRA) on behalf of the IRS.
While the Canada‑United States Income Tax Convention contains a provision that allows for the collection of taxes imposed by another country, this does not apply to penalties imposed under laws that impose only a reporting requirement.
Furthermore, our Government has been clear that CRA does not and will not collect the U.S. tax liability of a Canadian citizen if the individual was a Canadian citizen at the time (whether or not the individual was also a U.S. citizen at that time).
Many individuals are also concerned that the investment or interest income earned in their Canadian Tax-Free Savings Accounts (TFSAs) and Registered Disability Savings Plans (RDSPs) may be subject to U.S. tax.
While TFSAs and RDSPs – both introduced by our Government in recent years – do not yet receive an exemption from U.S. income tax under the existing Canada-United States Income Tax Convention, the Government will argue for such an exemption as the Convention is renegotiated with the United States.
Another piece of U.S. legislation causing concern is FATCA, which is proposed to come into force on January 1, 2014.
To be clear, Canada respects the sovereign right of the U.S. to determine its own tax laws and combat tax evasion. However, Canada is not a tax haven and people do not flock to Canada to avoid paying taxes. In addition, we have existing ways of addressing these issues with the U.S. through the exchange of information provisions of our bilateral Income Tax Convention.
That’s why the Government is actively seeking a solution with the U.S. government that both countries will find agreeable. The U.S. has been receptive to the concerns we have raised. This is reflected in the U.S.’s openness to alternative approaches that will minimize the red tape burden, minimize conflicts with privacy and other laws, and improve collaboration between governments.
We continue to work with our U.S. counterparts towards a fair and reasonable solution that will address the concerns of Canadians and protect their interests.
Jim Flaherty
Minister of Finance of Canada
I have not previously seen this, but there is a lot of good information regarding FATCA — and, among many other subjects, RDSPs, RESPs and TFSAs, which I was doing a search on this afternoon. At any rate, it is worth another review by anyone interested. (I will cross-post on the Maple Sandbox.)
This is a link to April 30, 2012 Canadian Bankers Association, Canadian Life and Health Insurance Association, Investment Funds Institute of Canada and Investment Industry Association of Canada submission to the IRS, Re: REG-121647-10: “Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions and Other Entities”
http://bsmlegal.com/PDFs/Canada.pdf
A little wonky in cut and paste, but part I was looking for / especially interested in:
In 2011, Flaherty wept when he thought about RDSPs, and he already knew that they were taxed and punished by the US as ‘foreign trusts’. He does not weep for Calgary411 and all the others who cannot protect their children’s RDSPs from US predation. He does not weep for all those children and adults in Canada who cannot benefit from an RDSP – merely because of an accident of birth – because they are duals with a US status parent, or were born ‘border babies’, or were born on US soil.
http://www.thestar.com/news/canada/2011/10/21/hardnosed_flaherty_shows_his_emotions.html
In 2012 RDSPs were still toxic ‘foreign trusts’ for those in Canada with a US connection – either for an dual Canadian-US parent to open on behalf of a Canadian child, or for a dual status child to own.
In 2013, Flaherty is in secret talks with the US re a FATCA agreement. RDSPs are still penalized by the US as toxic ‘foreign trusts’.
Yet, Flaherty is still pleased http://www.thestar.com/opinion/editorialopinion/2013/01/24/goar_jim_flaherty_lends_a_hand_to_canadians_with_disabilities.html
“……For the current
finance minister, Jim Flaherty, it is a barrier-free Canada. He wants to
move people with physical and mental disabilities from the margins to
the mainstream.
He took the first step in the 2007 budget, introducing a new Registered Disability Savings Plan
(RDSP) to help families set aside money for a member with a disability.
Like many parents of children with disabilities, he and his wife,
Ontario MPP Christine Elliott, worried about what would happen to their
son, John, when they died.
To allow low-income parents to participate — even if they couldn’t afford to contribute — he created a Disability Savings Grant
worth up to $3,500 that would be deposited annually in their RDSP
account. To top up the savings of moderate-income parents, he created a Disability Savings Bond worth up to $1,000 a year…..”
So, Flaherty has laudable goals – to assist Canadians with disabilities, and their parents and guardians save for the future. Unless, they were born in Canada as duals via a US parent, or born in the US, of Canadian parents, or sent across to a US hospital to be born when the Canadian ones were too full, and other scenarios that burden Canadian citizens and residents with the US taxable shackle.
As long as none of them is claimed extraterritorially, inside Canada’s supposedly autonomous and sovereign borders, by the US – as a ‘taxable person’. Then, like > 1,000,000. in Canada, they will just have to stay in the back of the Canadian bus, because in that instance, they are second class Canadians – and for Minister Flaherty, they still don’t count enough to fight for. And though they and their families are all Canadian taxpayers, they have to watch as their fellows get grant money and tax breaks from the Canadian federal government, that the US siphons away from them on the flimsiest of pretexts.
And to compound things, those with intellectual disabilities will never be allowed by the US to escape, or allow their guardians help free them by renouncing on their behalf.
Minister Flaherty, you’re not the only one crying over the RDSP.
Regarding possible exception of the Canadian Registered Disability Savings Plan (RDSP) for FATCA — will it be exempt or will it not?
REVISED COMMENT:
OK, I get it now — it is within the 544 pages of the Regulations that the RDSP meets MOST of the definition (although proceeds from the RDSP are not limited to use for medical benefits; it can be used for housing for the disabled person):
(B) Non-retirement savings accounts. An account (other than an insurance or annuity contract) that satisfies the following conditions under the laws of the jurisdiction where the account is maintained: CHECK
(1) The account is subject to regulation as a savings vehicle for purposes other than for retirement; CHECK
(2) The account is tax-favored (as described in paragraph (b)(2)(i)(E) of this section); CHECK
(3) Withdrawals are conditioned on meeting specific criteria related to the purpose of the savings account (for example, the provision of educational or medical benefits), or penalties apply to withdrawals made before such criteria are met; MOSTLY CHECK
and
(4) Annual contributions are limited to $50,000 or less; CHECK
Based on this, for which I thank the Canadian government and Finance Minister Flahterty as it is likely they played some part in this and other registered savings accounts being exempted and stated in the announced FATCA Regulations — and for much more, Canada must not sign an IGA with the US.
@Calgary411: I was researching the ways in which a Canadian Registered Disability Savings Plan might be made compatible with US law, and I note your citation of Flaherty: “He has confirmed that the RDSP (as well as the TFSA and RESP) are not recognized in the Canada-United States Income Tax Convention but that my concerns on this matter will be considered when the Convention is next open for renegotiation.”
In the case of Canadian imposition of capital gains tax on deemed sale at death it took a decade before it was “convenient” for the two parties to provide in the Third Protocol for assimilation to the US estate duty for purposes of a tax credit. As with retirement trusts, an agreement would have to waive PFIC and certain tax provisions. It is a good sign if Canada has put disability trusts on the list to consider in their next round of discussions with the USA. (A mutual agreement would free the use of such trusts for disabled US citizens in Canada who do not have Canadian citizenship and thus are not exempt from the mutual tax collection procedure of the tax treaty.)
The US does have a vaguely similar provision in its Qualified Disability (or Special Needs) Trust: http://www.free-living-trust-information.com/disability-trust.html My understanding is that these are often integrated (made compatible with) Social Security Disability Insurance or S.S. Supplemental Income. http://www.specialneedsalliance.org/taxes.pdf There’s quite a bit else online and I wonder how far you’ve gone to see what might be done to take advantage of your son’s present, and your former, US citizenship, especially if you have qualifying quarters of coverage. https://duckduckgo.com/?q=qualified+special+needs+trust+%22social+security+disability%22
You can imagine that it would be bad press for the IRS to pursue a disabled person in Canada in any event. Furthermore, most foreign cases are pursued based on collectibility and probable recovery of substantial funds. But as IRS lawyers and attachés have told me, a problem arises a case is forcibly brought to their attention. As of course your situation has done.