Assuring the Care of a Family Member with Special Needs — but how does that work for a US Person in Canada?
James M. Hayes, a lawyer in Binghamton, N.Y., who specializes in estate and other planning for people with special needs and has a developmentally disabled adult son, put it more bluntly. “I’ve never felt like I was taking advantage of anything,” he said. “It’s my adult son. I’ve never really felt that people who have adult children like my son should have a burden that other people don’t have.”
What about US Persons in Canada?
I must say it’s hard for me to continue to feel this strongly hearing the arguments to the contrary that those like my adult son, or for that matter me and the medical care I’ve received in Canada over the years (although remaining in the work force and paying taxes), are not a burden.
Special Needs Planning in Canada, including the RDSP, is a good resource for planning — in Canada for Canadians. There are likely similar programs in other countries.
I’ve tried to plan and save for my son (and my peace of mind) and not leave it all to government funding — through contributing to a Canadian Registered Disability Savings Plan (RDSP) and also putting in place a Discretionary Trust through Royal Trust, in conjnction with my daughter (my son’s only other blood relative in Canada) that will take effect upon my death to seamlessly be the source of paying expenses for my son. Upon my death with my estate consisting of my house, my RRSP/RRIF and minor investment, my son will no longer be eligible for Alberta’s Assured Income for Severely Handicapped (as he will have over the limit of assets, which is the way I think it should be). It seems that because my son is deemed a US citizen (although never registered with the US, never lived in the US, never had any benefit from the US), my planning is of limited use and robs me of the peace of mind so necessary for me that I’ve done everything within my power to ensure my son will be OK after I’m gone (and government funding perhaps gone).
I continue to question that I and other parents, guardians, trustees are not allowed the right, even with a court order, to renounce US citizenship on our family member’s behalf when we deem that in their best interests. Perhaps someone can enlighten me of the benefits my son would have from the US after my death and, as I see it, would have to be transported to that country for his care from the dwindling resources of social security there. Does that make any sense? Why would they want to take this on? Would this make my son very discriminated against in a strange new country, not the one he was born and raised in and looked after and encouraged him to be as independent as possible — Canada?
From the above article for planning for special needs persons within the US (and US Persons Abroad?):
With each passing election season, the conversations about the cost of government-provided health care and Social Security get more urgent.
But debates about the deserving and the undeserving and the proper level of budgets and taxes tend to gloss over the issue of disabled people — many of whom must hope that the programs they rely on are not cut, because they have no way to make up the difference.
There were 5.5 million nonelderly adults with disabilities whose health care was covered by Medicaid in 2009, according to a Henry J. Kaiser Family Foundation estimate using the most recent numbers available. And an estimated 6.9 million nonelderly disabled people receive Social Security payments under the Supplemental Security Income program, according to federal government figures.
For every one of those people, many of whom draw from multiple sources of government aid, there are often several family members helping to sort out the financial details of that relative’s care. They navigate a confounding thicket of tasks and rules. On one side, there is the bureaucracy that government program administrators may erect at any moment. On the other, there are specialized trust accounts and estate planning issues to consider. Even sophisticated investors and ace budgeters find themselves lost when encountering all of this for the first time.
Note: I am not a “sophisticated investor” or “ace budgeter” but I have tried to have in place an effective plan for my son.
Just thinking aloud again. Thanks for listening.
@Calgary411: I am having a hard time figuring out exactly what your point is. James Hayes, who you quote, writes this:
“I’ve never really felt that people who have adult children like my son should have a burden that other people don’t have.”
That is sooo twisted. My son is dead, so if I applied the same rule then my son would either come back to life or everyone else on the planet with a son would have to lose theirs.
My mother used to say “we all have our crosses to bear”, yet Hayes seems to think that everyone else is responsible for relieving him of his burden because it has to do with children and disabilities. I don’t buy it. In fact I would say that it is the mutual backscratching that goes on between these “aggrieved” special interest groups who feel “cheated” or “disadvantaged” and welfare government that is the root of the entire western malaise and FBAR, FATCA as well.
Take this recent example of a system completely beyond salvage:
Landmark Calif. Burger Joint Forced to Shut Down Over ADA Lawsuit
My brother has spent $60K in legal fees in a dispute whether the handicapped parking spaces at his business are 2 inches to narrow!
Or take this recent Burning Platform post:
DECLINE, DECAY, DENIAL, DELUSION, & DESPAIR
The welfare state has twisted and warped every market until nothing is real any more. All of it is staged. Get the world back to reality and then I will start worrying about people with special needs.
*@Calgary, couldn’t you arrange to get a private ruling from the IRS which would make an exception in your disabled son’s case and thus allow for his special account along with any trust set for him to still retain preferential tax treatment, especially as he can’t renounce? It’s certainly not his fault if you had set up a perfectly legal tax-efficient account for him based on your understanding at the time…seems you’d have a strong argument for reasonable cause, especially on compassionate grounds.
*There is a class of lawyers who pursue socially useless cases for their own personal profit, soliciting their own stable of disabled individuals to search out vulnerable mom & pop retail establishments. This is a parallel to those who bring class-action securities-law cases supposedly on behalf of shareholders, but those same shareholders pay the costs and the award out of the firm’s equity. The defalcating management keeps its bonuses and stock options.
Trust funds and investment funds including RDSPs and UK CTFs (Child Trust Fund) and Child ISAs, unless specifically provided for in a treaty or dealt with as an investment class in a treaty are risky for US persons to use, and somewhat less risky for the minor beneficiary. Sometimes a non-US citizen trustee can be used, or a life insurance scheme. In the end it’s one of those things where the person who volunteers information to the IRS, or the person whose involvement shows up in an estate tax return, is the only sort really at risk.
It is of no practical use to bewail the unwanted citizenship of your son. He cannot effectively be pursued in any case by the USG, since he can’t defend himself. Had you not obtained a US passport for him I doubt if US nationality could have been asserted against him, for that very reason. I can think of potential workarounds but I would not wish to discuss them in a public forum. You should not choose a trustee who is vulnerable to US assertion of jurisdiction, either physically or vicariously. I have mentioned Van deMark v. Toronto-Dominion Bank before: the IRS seized assets of the NY branch of the bank over a contested claim against the father of a depositor. The basis for the seizure was transferee liability. The Ontario court restored the money to the depositor and the bank lost out. No wonder Canadian banks are wary.
For @ConfederateH: the scammers on those scooters and motorised wheelchairs are not the elderly and infirm. They are the crooked Medicare providers who as often as not never deliver the scooter and simply forge the name of some unsuspecting Medicare beneficiary. You could have known this by watching TV or performing an Internet query, as I just did: http://medicare-fraud.net/scooter-store-gets-caught-scooting-medicare/
Thanks for your reply and point of view on all as scammers, ConfH. For sure “all of it is staged” is not true. It’s good to know the opinion many non-scammers are up against so they know where they stand. I don’t know the answers.
My son does not have a US passport, nor a US social security number. He was born in 1974 in Canada to US parents who became citizens in 1975. He has received no benefits from the US. He will remain in Canada. In your opinion, would a Canadian trust company for a discretionary trust be vulnerable to US jurisdiction, perhaps even through FATCA? That would be valuable information for planning. My son has been identified in my FBARs as I reported being the Holder of the RDSP / my son the beneficiary by the time he is 60 years old. Thanks.
Thanks, Mona Lisa.
It would have to be a decision for anyone in my son’s situation. I don’t want special regard for his case. There will be many around the world! It is determined there is NOT a compelling reason for renunciation of his supposed US citizenship.
I have an adult daughter who is quite handicapped, was also born and raised outside the US and her father is not American. The embassy here is trying to help us find a way to have her renounce her citizenship. You cannot appeal to the IRS but have to go directly to Congress via the State Dept. because this is considered a right you can’t give away, on a par with marriage (no one can force you to marry). I won’t even get into the nuttiness of the logic of this, but on the practical side, chances of them agreeing to allow it are apparently very very tiny. We’ve been at this for 1.5 years, so far no progress despite a kind, understanding and helpful ambassador, who happens to have a similarly handicapped relative.
Your son may well be a US citizen by birth to US parents. But the USG has no means nor any interest in asserting citizenship against him if neither he nor his parents nor his guardian have claimed it. Why would you bring his situation to the attention of the State Department given that only an Act of Congress could relieve him of the burdens of citizenship whereas it is IRS policy not to look for “hidden citizens” abroad. Of course had you obtained a SSAN and claimed him as a dependent on form 1040 there would be a record. As of now there is not and won’t be unless your estate mentions him on form 906. Copies of wills and relevant trust agreements (revocable and certain grantor trusts and the like) need to be supplied with form 906. Is your estate large enough to require it, and do you (or will you) have sufficient US assets to do so?
Neither I nor anyone with recognised credentials can advise you to violate or to ignore the law. But you need not and should not volunteer information. Also I’ve seen a discussion recently (resulting from Romney’s apparent decision not to claim all the tax deductions he could) confirming me in the view that except for FICA and SET (as to which there are other questions) one is not required to take every exemption or deduction. FATCA/FBAR are unique in the sense that you have to reveal financial assets that are not necessarily taxable and that yield no income. (Maybe not unique: I think domestic municipal bond interest has to be revealed as well.)
Be careful about the lawyers, accountants and trustees you select. They all have their own agendas and their own vulnerabilities. Those who become too notorious are susceptible to nasty retaliation: http://www.stepjournal.org/news/news/main_story/swiss_privacy_regulator_reacts.aspx (Swiss privacy regulator reacts to US detention of banker’s children)
Thanks once again, punktlich, for information for me to think about.
I will renounce my US citizenship next month. I am now compliant to the US since 2005 for tax returns and FBARs. I won’t be a Covered Expatriate, although I live in a Canadian city where real estate values have appreciated greatly since I purchased in 1991, so that is a big capital gain for many here (a profit we are living in and would have to replace if sold).
I have no plans to do anything regarding my son’s supposed US citizenship (except stay within Canada). I am, of course, very interested in your statement “… the USG has no means nor any interest in asserting citizenship against him if neither he nor his parents nor his guardian have claimed it.”
*Sadly, this won’t help you to feel any better, but the “benefits” your offspring could receive in the US may be something like this:
Government settles lawsuit filed by mentally disabled US citizen who was deported to Mexico
I hope that your child is well informed on US legal matters and prepared to hire a lawyer. 🙁
Thanks, Swiss Pinoy,
I certainly want my son to stay in Canada!! I can’t imagine what would happen to him if he somehow got to the US after my death — so the US could extend their benefits he should not be denied by renunciation! My son would not survive on his own in the US and would be so very vulnerable — he wouldn’t be informed on US legal matters or in any way prepared to hire a lawyer.
Outrageous, unbelieveable and disgustng to read:
@ punktlich, one more question:
Re: “He cannot effectively be pursued in any case by the USG, since he can’t defend himself.” Could a Parent, Guardian or Trustee be pursued by the USG, if such a mentally incapacitated person could not defend himself — even when the probability might not be high?
I wish there were something I could say that would be of some practical use. I just don’t know nor can I think of any possibilities other than someone in Treasury should and presumably could, offer that no action would be taken against your son on compassionate grounds. Or better yet, someone in State so IRS would never come into the picture (presuming his income low enough not to owe).
I find it unbelievable that there would be grounds for deportation based upon a statement alone. Wouldn’t they have to have some level of proof of the Mexican citizenship?
Suffice to say that your son has, can have, no mens rea. If there are no US assets ipso facto the USG could not pursue him or them. He is anyway an unlikely target. Of course if some whistleblower should present a case that a parent or guardian or trustee has engaged in wilful tax evasion all of the above might be on a little list somewhere along with Marc Rich. But the Canadian Government is hardly likely to assist, and the USG will not and cannot pursue anybody in the Canadian courts first because they won’t hear the case and second because they would risk the foreign court taking it upon itself to interpret US tax law. Have a look at the Harden case http://scc.lexum.org/en/1963/1963scr0-366/1963scr0-366.html which is the only time I am aware of that the USG tried to enforce a tax claim (actually a tax judgment) in Canada other than through Revenue Canada, relying the (later) tax treaty (which excepts claims against a Canadian citizen, even if a dual national).
More encouraging, you are not alone. See this: http://duckduckgo.com/?q=rdsp+%22american+citizen%22 It may well be that by the time it is relevant to your son, a tax protocol will have been signed between the US and Canada concerning RDSPs. Or a unilateral interpretive memo could be issued: I haven’t studied the question so I can’t offer an opinion. Also it is decades since I have lived or worked in either country.
If you are not a US citizen at death then your son is, in principle, required to report a foreign inheritance on form 3520. The consequences if he does not, and he is not on record as being a US person, are … what?
What is real interesting is the one time publically the US tried enforce a tax judgement through Revenue Canada in the so called Chua case they got slapped down again like in Harden. Links below:
One of the issues was the retroactivity of the claim and denial of due process rights under Canadian law.
Thanks for your replies, not just for my son but for anyone lurking here looking for information re the situation for their like family member. I am very glad that I took no action to register my son with the US. I am clear in my mind my actions on his behalf — none other than staying in Canada. I think with my approaching renunciation and filing of 2012 tax returns and 8854 after that, my family will finally have less anxiety.
Many of families looking after a developmentally delayed or otherwise mentally incapacitated family member may not have a voice. I think anything we can provide here will help others in making their decisions about supposed or actual US citizenship, retaining it or expatriating. It is encumbent on all of us to get on with other things in our lives.
@nobledreamer, it is unbelievable there would be grounds for deportation based upon a statement by that person alone. Scary stuff if you are thinking about your loved one in a similar situation.
I know the Chua case. Compare Tesher http://uniset.ca/other/cs6/246FSupp2d297.html where the bankrupt Canadian taxpayer failed to complete the conditions required for his Canadian discharge.
I read Lyttle’s story in the paper at the time. What is amazing is that deportations occur, at least in the case of Mexico and perhaps other Latin American countries without bothering to try to document the deportee with his or her consulate. In fact US prisons are filled with mentally disabled and with deranged people. Since there is no accommodation for them except the street or in jail. Mexico would have a perfect right to refuse entry to such a person. An unwanted alien cannot be deported, and cannot be kept indefinitely in prison (per the Supreme Court) if no country will have him.
@calgary411, the US won’t provide anything for any of us where we live outside the US lifelong, yet expects us to contribute to those inside the US. But for the efforts of advocates like the ACA and AARO, the US would have required those of us ‘abroad’ – enforced by the IRS – to pay for the US Healthcare mandatory program – though we could not access it from outside. The US then prevents us from helping ourselves and our family members, children and those with disabilities – by penalizing our savings and participation in programs in the countries where we actually live. This is immoral and unjust. The US should be ashamed of how it treats those with disabilities, children and others ‘abroad’ – it exploits them and all of us, and extorts revenue through confiscatory penalties – and can do so on the RDSP – specific to disability saving. Why this isn’t a scandal held up high by it’s detractors in other countries, I don’t know. Why this isn’t brought up before the UN, is a shame.
If the US won’t help provide for your son, yet firmly claims him as a citizen with a taxable burden – and prevents him from renouncing (even by proxy), at minimum then, it should at least not hinder your and Canada’s provisions for his upkeep, and stop penalizing those grappling with disability – who very often face life under the poverty line unless they continue to have parents and guardians who can provide for them.
Again, what is the nature of the social contract the US pretends it has with those it claims as subject to taxation and military service, from abroad? Is it a contract if one party – the expatriate, or dual born abroad doesn’t recognize it, and the other, the US offers nothing, yet stakes arrogant claim to all?
Yes, it is all so one-sided, arrogant and lacking sense — a sham. One would think that releasing the US from their “responsibility” for any benefits for those whose families /guardians want to claim renunciation for that disabled person, would be in the US’s best interests.
I feel that I’ve reconciled in my mind my non-course of action. I want others to skip as much of the anxiety this creates in making their decisions.
Just Me’s comment earlier today was interesting:
and, for this in one version, among other things, similar to the Canadian Bankers Association and Investment Associations of Canada ask for:
Thanks, ACA and AARO for the concessions you have gained on our behalf.
Thanks, badger, once again for ALL.
Further reading about Mark Lyttle demonstrates another area where the US is/has engaged in outrageous practices. I have not been aware it is standard practice to deport people from prisons if they are assumed to be alien (read “Mexican”). Grrrr…..
The immigration agency (ICE-Immigration and Customs Enforcement) had his FBI file which clearly stated he was a USC and included his SSN. He had a long history of Bipolar I. This was also in the file. He didn’t speak Spanish. His father was from Puerto Rico so he was easily profiled as Mexican. He was adopted so the record of birth was not in the locality he grew up in. The judge ignored the facts and ordered him to be deported. This particular judge has issues concerning complaints and not following instructions concerning those without attorneys. Thank goodness for the police in Guatemala who directed him to the Embassy where it took all of one hour to track down his family and even time to get him something to eat.
A nightmare scenario occuring because “ICE and the Department of Justice assumes everyone in detention is an alien and does not afford them the rights of US citizens. This is wrong for legal residents who are also unlawfully deported and it is obviously unconstituional and illegal to do this to US citizens.” (http://www.huffingtonpost.com/jacqueline-stevens-phd/deporting-american-citize_b_265187.html).
Sounds kinda familiar eh? We are assumed to be tax evaders, the US engages in unconstitutional and illegal practices against USC’s.What a paranoid hellhole the US has become.
*It used to be a nation by the people for the people.
Abe Lincoln is rolling in his grave.
Abe Lincoln was owned by the banks and the railroads and is the root cause of the loss of our constitutional rights. He imposed the first unconstitutional income tax and the first fiat dollars. He denied the south the constitutional right of secession and invaded them causing a massive war which he then used to start the process of enslaving the US population. Abe Lincoln was the first step on the road to FATCA.
It can’t be said too many times: because of citizenship based taxation, the US person can struggle to survive outside the US, but we are denied many of the same opportunities to thrive that are offered to ‘regular’ citizens. There’s been a fair bit of debate here whether we should be less evangelical when talking to other USP’s abroad who may not know about these issues, but my feeling is the more who know, the better. I’m not interested in keeping Obama’s dirty little secret of how he and his cronies are destroying the lives of US persons living abroad and misleading immigrants into tax servitude and the FBAR trap.