Estate Matters; RRSPs, RDSPs, RESPs, TFSAs; Snowbirds

56 thoughts on “Estate Matters; RRSPs, RDSPs, RESPs, TFSAs; Snowbirds”

1. Yeah for IBS Administrators, thank you!!!

2. Intriguing different viewpoint (with references) on the treatment of TFSAs. Important to note this differs from common wisdom. Not added here as tax advice. Note that the stakes could be very high if this viewpoint is wrong.
   http://connect.cch.ca/newsletters_FinancialPlanning_August2013_article3?elq=4310940279474796934BEF372072CED2&elqCampaignId=
   THE US IMPLICATIONS OF A TAX-FREE SAVINGS ACCOUNT
   —Kevyn Nightingale and David Turchen, MNP LLP

3. As posted on another thread:
   One of the biggest FATCAnatics demonstrates that US gross hypocrisy and unethical behaviour knows no bounds – Senator Schumer urges the creation of a US tax free savings plan for those with disabilities living inside the US, while disregarding and supporting the US extraterritorial taxation and penalizing of the disability savings and benefits (ex. Canadian RDSP ) of those resident OUTSIDE the US with NO US economic connection or US benefit. This is just a continuation of the US gross unethical behaviour which justifies the punitive US extraterritorial taxation and ‘foreign trust’ treatment of deemed “taxable USP” children’s education savings plans like the Canadian RESP – while simultaneously urging that families inside the US avail themselves of US education savings tax exemptions https://studentaid.ed.gov/types/tax-benefits
   See;
   http://www.autismspeaks.org/advocacy/advocacy-news/schumer-urges-congress-move-quickly-tax-free-savings-plans

   I urge you to use this evidence to approach your MP and show them the gaping holes in the current Canada US tax treaty – which does NOT protect the TFSA savings of Canadian families, the education savings (RESP) of Canadian children, and the disability savings (RDSP) and disability grants and benefits of resident Canadian citizens and taxpayers with disabilities from the extraterritorial predations of the US via US taxes and potential penalties and very high accounting costs that treat our legal local Canadian savings as US taxable ‘foreign trusts’. All the while urging US residents to avail themselves of equivalent US tax benefits and exemptions.

   Ask your Canadian MP whether they ‘respect’ and support the ‘right’ of the US to extraterritorially deprive Canadian families, children and dependents of the savings and benefits the Canadian government has created in order to achieve important social and economic goals, while the US undermines Canadian society via extraterritorial greed and extortion.

   Print off and cite some of the many available instances where our federal government touts the TFSA, RESP and RDSP as important to achieving their economic objectives, such as:
   “Supporting Families With Children

   Since 2006, the Government has significantly increased support for families to better assist them with the costs of raising children:

   The Universal Child Care Benefit, available since July 2006, gives families with young children more choice in child care by providing $100 per month for each child under age 6.
   The Child Tax Credit, available since 2007, recognizes the expenses associated with raising children by providing personal income tax relief of up to $329 in 2012 for each child under age 18.
   The Children’s Fitness Tax Credit, available since 2007, promotes physical fitness among children through a 15-per-cent credit on up to $500 in eligible fees for the enrolment of a child under age 16 in an eligible program of physical activity.
   The Children’s Arts Tax Credit, available since 2011, promotes children’s participation in artistic, cultural, recreational or developmental activities through a 15-per-cent credit on up to $500 in eligible fees for the enrolment of a child under age 16 in an eligible program.
   The amount that families can earn before the National Child Benefit supplement is fully phased out—or before the base benefit under the Canada Child Tax Benefit begins to be phased out—was increased starting in July 2009. As a result, a low-income family with two children receives an additional benefit of up to $443 in the 2011–12 benefit year.
   The spousal and other related amounts were increased to equal the basic personal amount so that single-earner families, including single parents, receive the same tax treatment as two-earner families, effective 2007.
   To help families with children with disabilities, the Government introduced the Registered Disability Savings Plan (RDSP) starting in 2008, and increased the Child Disability Benefit component of the Canada Child Tax Benefit as of July 2006. Families with infirm children may also claim the new Family Caregiver Tax Credit, a 15-per-cent credit on an amount of $2,000 available starting in 2012. Budget 2012 introduces several measures to improve the RDSP. These measures will give RDSP beneficiaries and their families increased flexibility to establish, contribute to and access savings from their plans.
   To help families with education costs, the Government took several actions to strengthen Registered Education Savings Plans and expand and enhance the Canada Student Loans Program, and launched the new consolidated Canada Student Grants Program. The Government also exempted scholarship and bursary income from tax and introduced the Textbook Tax Credit.
   Families are major beneficiaries of the substantial tax relief the Government has provided to all Canadians, such as the 2-percentage-point reduction in the Goods and Services Tax, broad-based personal income tax reductions, and the introduction of the Tax-Free Savings Account, which helps Canadians meet lifetime savings needs.”
   http://www.actionplan.gc.ca/en/page/stimulus-phase-canada-s-economic-action-plan-final-report-canadians
   or,
   http://plan.ca/blog/thanks-jim-flaherty-disabled-canadians-can-fulfill-dreams/

   Here are samples to cite and provide re the important social goals that are being thwarted by the gross lack of protections to RESPs in the current tax treaty with the US, and which Conservative MPs purport to ‘respect’:
   http://www.parl.gc.ca/content/lop/researchpublications/prb0625-e.htm

   ‘Federal Investments in Post-secondary Education and Training*’
   Chantal Collin, Daniel Thompson, Social Affairs Division
   Revised 5 May 2010
   Publication Number 06-25E PDF
   and,
   http://www.fin.gc.ca/taxexp-depfisc/2006/taxexp_5-eng.asp
   ‘Investing In Post-Secondary Education: The Impact Of The Income Tax System’

4. Thank you, badger. Done, with your help!

5. @calgary411, I think that Canadian MPs can generate NO acceptable rationale for their failure to protect our registered savings from the US – particularly when confronted with the compelling and clear evidence that the US Treasury/IRS treats the US equivalent as tax exempted or tax favoured when a US resident owner uses a parallel type of savings plan – which the US created for the very same social and economic reasons as the government of Canada’s plans and policies.

   Ask them where is any evidence that the US extends equivalent and reciprocal ‘respect’ to those it claims as ‘taxable US persons’ in Canada for the exact same types of savings and government goals – in the country where those affected are actually resident (and many of us are citizens)? Those deemed UStaxablepersons outside the US are not allowed to benefit by the US plans and deductions and exemptions, yet are not allowed to benefit by the ones in Canada either. This newest initiative supported by Schumer is robust evidence of the obvious hypocrisy. It is so irrefutable that I would enjoy seeing a Canadian MP explain it away – and their failure to get registered accts UStax-exempted under the existing treaty – despite their passage of the FATCA IGA. The Conservatives have been in power for so long that they cannot explain why they have let the treaty leave us so unprotected for so long and then enacted laws that exacerbated its serious flaws.

6. http://blogs.angloinfo.com/us-tax/2014/09/08/too-many-days-in-the-us-they-know-everything/

   Too Many Days in the US? They Know Everything!!!
   September 8, 2014
   ……”…Tracking Your Every Step

   Did you know that the U.S. Department of Homeland Security is tracking your entrance to and exit from the USA? What better way for the IRS to determine if you should be treated as a US “resident” for income tax purposes?

   The arrival and departure date records of nonimmigrant aliens entering and departing the United States are maintained in the U.S. Customs and Border Protection’s Nonimmigrant Information System, available on the I-94 website. You can access these records quite easily (and so can the IRS). If you are a nonresident alien, NRA, for US income tax purposes, you should carefully monitor your days of physical presence in the US. You can now view the dates that you have entered and exited the US on the U.S. Customs and Border Protection I-94 website. Simply enter your name, date of birth, and passport details: Travel records are available for the past 5 years.”……….

7. There is a much easier way to deal with TFSAs.

8. For snowbirds:
   http://www.chathamdailynews.ca/2015/02/20/irs-coming-down-hard-on-canadians-who-stay-more-than-182-days

   ‘IRS coming down hard on Canadians who stay more than 182 days’
   Bob Boughner, Special to The Daily News
   Friday, February 20, 2015 9:47:57 EST AM

9. http://www.cbc.ca/news/business/falling-loonie-has-some-canadian-snowbirds-selling-their-u-s-homes-1.3031088

   ‘Falling loonie has some Canadian snowbirds selling their U.S. homes
   Palm Springs a case study in Canadian malaise’

   By Kim Brunhuber, CBC News Posted: Apr 17, 2015 5:00 AM ET Last Updated: Apr 17, 2015 7:49 AM ET

10. CONTINUATION OF THE CANADIAN SNOWBIRD (& OTHERS) CROSS-BORDER SAGA, 2015-2016 SEASON
    There are right ways and wrong ways but there are no ways unless Snowbirds and others know all the US and Canadian rules, regulations and relevant forms.

    CBC, October 27, 2015 “UPDATED Taxman clamps down on snowbirds heading south, hopes to save millions”

    Snowbirds could have financial wings clipped by new border security program tracking benefit payments

    Newly obtained memos say the Canada Revenue Agency and Employment and Social Development Canada expect to save between about $194 million and $319 million over five years once the long-anticipated system is fully in place.

    Federal officials have been working quietly to satisfy privacy commissioner Daniel Therrien’s office that personal information will be properly collected, used and disclosed under the program.

    *******************

    The first two phases of the program have been limited to foreign nationals and permanent residents of Canada and the United States, but not citizens of either country.

    The initiative was to be expanded by June 30 of last year to include information-sharing on all travellers crossing the land border.

    ********************

    Beware the IRS, too?

    Cross-border tax adviser Matt Altro told CBC News the new measures are “quite upsetting to hear” and his clients won’t be impressed.

    “If you’re going to maintain your Canadian tax residency, and continue to pay tax in Canada, you should be able to benefit from these programs [like OAS],” said Altro, the CEO of MCA Cross Border Advisors.

    He said it doesn’t make much sense to crack down on snowbirds, unless the real goal is encouraging retirees to give up their Canadian residency status — which can have tax advantages, like a lower tax rate on RRSP withdrawals.

    “If you become a non-resident of Canada, you are not subject anymore to OAS clawback,” he said. “You benefit from it better than a Canadian would.”

    However, changing residency also affects a retiree’s ability to access the Canadian health-care system.

    “Canadian snowbirds need to be aware that the [U.S. Internal Revenue Service] is probably already … following suit, and could bring up a whole host of issues on the U.S. side if you’re spending too much time in the U.S.,” he said. “You need to be working with a cross-border [tax] professional who knows how the system works.”

    The crackdown could affect not only retirees but younger Canadians who spend large stretches of time abroad.

11. OK, to the subject of RRSPs. Sorry to bore any non-Canadians.
    I’m doing online research as to the holding of physical gold to protect ourselves from the parasite to the south. I notice there are a few companies out there offering physical gold as an RRSP option. This is not to be confused with the numerous mutual funds/ETFs that claim to be based on gold but are just paper promises. They offer to keep physical gold in storage for you, with your name on it (one offering an annual fee of 1% of the value of the metal stored, not expensive vs mutual fund management fees) and the whole thing is RRSP eligible. You can always ask to take the gold away in your hand, but this would be deemed an RRSP withdrawal with all that entails.
    Does anyone here know the FATCA implications of this? Obviously, we’re talking registered accounts here, so the CRA will know of it, but is this within the scope of FATCA? If not, we may be on to something here. Needless to say, I have no illusions about my RRSP investments being safe from the parasite, even if it’s not supposedly reportable.

12. Canadians deemed USPs are being deprived of the grant and tax benefits created by our own local government. Advised by the US Tax law compliancers NOT to hold an RESP, or TFSA, to get rid of existing ones, or have a non-USP hold them on their behalf (not really a workable suggestion).

    These are the unacceptable options the professionals are advising Canadian UStaxable tainted persons:

    Renounce your US citizenship

    Close your TFSA or RESP (and the RDSP? – no workaround listed by the compliance condor though they have had clients that need them)

    Surrender signatory authority on financial accounts

    Don’t hold any Canadian mutual funds outside of an RRSP/RRIF

    Don’t have the common Canadian trusts that the US would consider a ‘grantor trust’

    etc.

    And we have to prove that harm has actually taken place? What BS.

13. @Pierre D, I don’t know the answer to your question, but the problem is not just how to hold/invest savings, but it is also what happens when you need to liquidate such an asset. Just as RRSPs are not reportable by the Banksters and the CRA for FATCA purposes, (though still FBAR reportable) but when they are dissolved, the money has to go somewhere……

14. Yes, Badger, you’re right. I guess I have this optimistic view, at least from the perspective of being my age (53) that I just need cover for the next few (3-5??) years that will be the most perilous for our kind after which this whole pile of crap will cave in upon the arrogant pricks and we won’t have to worry any more. I don’t plan on any withdrawals from the RRSP before then, unless it’s a flight to safety.

    Which reminds me to ask, do you think that we would have any defense against the Government of Canada to get things repaired after we withdraw from RRSPs “under duresse” as in be able to reinstate our RRSPs with all penalties/taxes removed after the US Gov’t bastards have been put in their well deserved place?

15. @Pierre, I am thinking that for the Canadian government to help re the RRSPs, they’d have to admit the injury and the threat – and that duress existed – which they assisted the US to enforce – though they’ll keep saying that since RRSPs aren’t reportable by the Canadian banks under the FATCA IGA, that they are protected. So I think it unlikely that we’ll get any help in that vein. They’ll just keep saying how the IGA ‘exempts’ certain accts – though they know the US still considers them reportable via FBAR.

    The Canadian government caved, and since they trumpeted the IGA as some kind of good deal, if the Liberals have chosen to take it over and defend it, it is unlikely they’ll do anything that even tacitly admits it is a bad deal which harms Canadian taxpayers and accountholders.

    Remember, the CBA Banksters are still lobbying whether we can see them or not.

16. March 1, 2016, latest *snowbirds* article from CBC:

    Canadian snowbirds could face U.S. taxman if they stick around too long — 5 tax tips for Canadians who like to fly south in the winter

17. http://www.cbc.ca/news/business/taxes/tax-time-2016-us-citizens-tax-shelters-1.3446226

    ‘IRS wants its share of Canadian tax shelters owned by U.S. citizens
    For Americans living in Canada, a TFSA or RESP may be a no-no because of U.S. tax laws’

    By Susan Noakes, CBC News Posted: Mar 01, 2016 5:00 AM ET

18. TaxConnections, March 9, 2016: “FBARs for Unsuspecting Canadians Present in the United States”

19. I’m archiving here this October 2012 notice from Serbinski which was taken down, and which apparently came to no action at all by the IRS or Congress;
    https://web.archive.org/web/20121028025112/http://www.serbinski.com/index.shtml
    “.NEW Development: 3520/3520A Filings and Penalties:

    We have recently been invited by IRS to present cases in which clients have been subjected to large penalties or other sanctions when filing compliance forms for TFSA and RESP accounts. We have been advised that IRS will take our position before congress to see if the foreign grantor trust rules can be streamlined in the same way that RRSP filings have been simplified.”
    ” Site Updated: Saturday, October 27, 2012 ”

    Thank the forces that be for the Wayback Machine;
    https://archive.org/web/

20. Very valuable overview of 25 years of IRS treatment of Canadian RRSPs;
    Hale E. Sheppard ‘Canadian Retirement Plans: What Does Revenue Procedure 2014-55 Mean for U.S. Tax Deferral, Form 8891, Form 8938, and the FBAR? ‘ 41(6) INTERNATIONAL TAX JOURNAL 25-37 (2016).
    http://www.chamberlainlaw.com/assets/htmldocuments/2015%20Canadian%20RRSP%20Article.pdf

    more at
    publications list
    http://www.chamberlainlaw.com/attorneys-96.html

21. Admins, please note and correct my mistyping above. The overview I note above by Hale E. Sheppard notes that the saga of the IRS mis/treatment of Canadian RRSPs goes back 25 years, not “2” as I mistyped above.

    Ex.
    “.the IRS had started publishing guidance regarding Canadian
    retirement plans over 25 years ago..”……

    For anyone wanting to know more about the IRS maltreatment of our legal, local,Canadian government created and registered savings plans, and the failure of the Canadian government to get them fairly treated by the US, you can also read;
    https://taxblawg.files.wordpress.com/2013/02/sheppard_intertaxjrnl_2-4-13.pdf
    International Tax Journal 13, January–February 2013
    ‘IRS Introduces Two Unique
    Remedies for U.S. Persons with
    Unreported Canadian Retirement
    Plans and Accounts’
    By Hale E. Sheppard

    At the rate of 25 years for a remedy for the US taxation and maltreatment of Canadian legal registered local retirement savings as taxable ‘foreign’ trusts – which are still of course subject to the FINCEN FBAR and penalty regime, I guess we can judge how long and after how much outcry we can expect any other fairness to prevail from the US. And how much dedicated effort and protections we can expect the Canadian government to pursue on behalf of Canadians and the Canada US tax treaty.

    Other countries without any protection for your legal local retirement plans, take note.

22. Question that popped into my head reading comments on the looong renounce/relinquish thread. If one were expecting an inheritance large enough to cause some sort of hypothetical US tax trouble and had thoughts of renouncing avoid this, is it sufficient to renounce before the money is disbursed from the estate, or would it need to happen prior to someone becoming deceased – i.e. what is the taxable event?

23. @nononymous
    Thats an interesting question. I would suppose it would be when the distribution actually happens , ie when the money is legally yours and unchallenged ?

24. Doesn’t the executor pay the taxes due before distributing the bequests?

25. It doesn’t matter. As a general principle, the earlier the better.