The suggestion, by Badger and Nononymous, for this new thread came from a comment by Elizabeth, which I’ve excerpted here and can be found in its entirety at this link followed by several comments in reply.
Please share your information and experience regarding estate matters for former US citizens both in reply to Elizabeth’s question and/or in a broader sense, and ask your own questions about these matters on this thread.
Elizabeth wrote: . . . My father, who was born in the USA and moved to Canada in [the 1980s], passed away recently. A little background… after moving here he was under the impression that he didn’t need to file taxes in the US if he properly filed in Canada . . . He relinquished his US citizenship in [the 1990s] by taking the citizenship oath in Canada, along with the rest of our family. He never lived as an American after that, never renewed his US passport, never lived there. He did collect Social Security from the years he did work there, but that was it. His accountants want me to file US taxes for his estate, but I don’t think I need to as he was not a US citizen anymore.
Heidi – it all depends on the legal requirements in the country where the will is being executed, doesn’t it? And the anxiety levels of any professional involved.
I agree we’re talking at cross-purposes. It appears to me that if the estate has been released for distribution (i.e. all taxes paid), the executor’s rôle is over and the deceased has not been deemed covered and that’s what the beneficiary should put on the estate tax form. Is that incorrect?
Not if the recipients are US persons and get a ‘covered’ gift. They could live in the US, and get a large amount from abroad in their bank accounts and fail to fill in a 3520 gift and estate tax form. Or they are identified US persons living abroad and their Fbars amounts are questioned/audited as any reported large deposit may be.
How do lawyers and accountants know if the deceased is/was a “US person” for tax purposes, or could suspect they COULD have been?
1. Personal knowledge from information the deceased provided (conversation, previous tax filings).
2. “Death certificate” provided by those presenting will (often by executor or family).
Regarding point 1, not much can be done about that, unless you switch professionals. Even then info may be passed along.
Regarding point 2, I will provide this Ontario, Canada-specific information. Upon death, the funeral home provides multiple copies of their own “death certificate”, for the family to wrap up affairs. (This is not the provincial government’s vital statistics death certificate, which is NOT required to wrap up affairs.)
All information on the funeral home’s DC is provided by those that attend the business to make the arrangements for the funeral. The place of birth is asked, no birth certificate is requested. I know this because I have been a part of arranging several funerals in Ontario.
FWIW
@plaxy
In 2015 the IRS said it was publishing form 708 for estates of covered expats which would accompany 3520 the estate and gift tax form.
It has not yet appeared.
A US beneficiary of an inheritance from any source is required to fill this form for all estate /gifts received by them.
http://www.hodgsonruss.com/newsroom-publications-irs-gift-bequest-tax-expatriates.html
Heidi – it’s up to the US beneficiaries how they report the bequest. I see no reason why they should report it as a gift from a covered expatriate unless the US tax law specifically requires them to report it as “covered” or provide proof that the donor was not “covered.”
I think we have 2 different problems here.
1.If the beneficiary is identified as a US person the IRS may be informed and if not compliant the estate may attract irs penalties
2.If a US iheritor receives a gift from a US person deemed to be covered., which would attract another 40%tax from IRS on its US person recipient.
Heidi – saw your link after I posted. Makes me thankful all over again that my children aren’t USCs. Shocking!
@plaxy
Yep, will have to wait and see if they come out with that threatened form. If the inheritors fail to report a covered estate then larger penalties apply.
What idiots they are, it basically insures that covered expats will not send their estates back to the US
“If a US iheritor receives a gift from a US person deemed to be covered., which would attract another 40%tax from IRS on its US person recipient.”
According to that link, the deceased will be deemed covered unless the beneficiary can prove they weren’t. It is an IRS gotcha. There’s nothing the non-US executor can do.
If the beneficiary is not living in the US, of course, the IRS can’t collect.
@Heidi, let’s take the hypothetical scenario of an executor unable to locate the deceased’s final IRS paperwork to assert non-covered status; if asked, there’s a risk that the IRS could deny that 8854 was ever filed or had been filed incorrectly; they could insist that the deceased was a covered expatriate.
I can’t remember who on here recently rang the IRS international helpline to check whether they had her final tax return and especially 8854 form on file. They refused to answer her question or offer her any certainty that she was cleanly out. Believe this was UK Rose…all they would sa is that it’s good news if one hasn’t heard back from them after renouncing and filing all the final paperwork.
So there is no certainty which could leave an executor in a quandary if there are U.S. Person heirs.
The deceased should avoid making bequests to US-resident USCs.
@monalisa
Exactly, it’s what they want so they can extract even more money.
It will surely backfire as I am sure many would rather their estate go to charity rather than into the US Treasury’ pocket. I certainly won’t be financing any more wars.
FWIW, although I’m not the person monalisa1776 is referring to, I rang the IRS international helpline after submitting my final return and 8854 and did get a confirmation for receipt of 8854. Legally, this counts for diddlysquat, but it made me feel better.
Also, I had in the past been able to get the IRS agent on the phone to confirm that my return(s) had been processed and there were no issues (at that time, at least).
Damn, I’m glad I’m finished with all that.
Yep, that 40% hit on the beneficiaries for a so-called “covered” bequest all but guarantees there will be nothing coming back to the US from the estate of a covered expat. (I say coming back but there is actually a pretty good chance that it was never in the US in the first place.)
I thought of an end run around this problem, at least for my particular situation. I’m due for a sizable inheritance when my surviving aging parent eventually passes. That estate will be distributed equally to myself and each of my siblings. (Assuming Trump doesn’t start a nuclear war and tank world finances.)
I don’t really need this extra money because I’m already quite comfortable with what I’ve been able to accumulate over my lifetime. Its occurred to me that when the time comes I could simply disclaim my share of the estate and ask that it be divided equally among my siblings (who are US citizens and US residents). In view of the fact that they would wind up being my heirs eventually anyway, why bother to bring money I don’t need into Canada and then turn around and try to get it back into the US after I die? Why not just give it to my US relatives immediately and forget about all the trans-border complications? As for my Canadian estate, well there’s plenty of nice Canadian charities, friends, homeless guys, etc, etc.
More to ponder…
Fortunately, where I live it’s quite easy to avoid probate altogether, and I’ll have no US beneficiaries (sorry, sis). Problem solved.
@maz57
I think my estate may help save a few elephants 🙂
So does anyone have any thoughts on either of these matters?
1. legal liability of executors, if deceased is a US person
2. legal or professional obligations of lawyers/accountants/bankers, if deceased is a US person
In the UK
Executor Duties include
Legal Responsibilities
•Going to Court and applying for the Grant of Representation, which is the confirmation of legal authority to administer the Estate. If this is done by the named Executor in the Will, this is called the Grant of Probate; if there is no valid Will, this is called Letters of Administration.
•Identifying and dealing with any valid claims against the Estate.
Tax Responsibilities
•Completing and submitting the Inheritance Tax (IHT) return and paying any Inheritance Tax owed.
•Completing the relevant Income Tax and Capital Gains Tax returns and paying any outstanding tax owed.
Personal Representative Responsibilities Explained
A Personal Representative can be held personally financially liable for any loss resulting from a breach of their duty, even if the mistake was made in good faith; such as
•Failure to pay the debts and liabilities of the deceased.
•Failure to pay all Inheritance Tax, Income Tax & Capital Gains Tax due.
•Failure to distribute funds to an individual who is successful in their claim against the Estate.
•Failure to identify, and correctly distribute funds to the beneficiaries; including those initially not known about.
Disappointed family members or dependents have up to 6 months to make a claim after the Grant of Representation has been issued while the deceased’s creditors can potentially make a claim against the Personal Representative for up to 12 years after the death.
I would suppose that ‘all taxes due’ would include foreign taxes. I would expect that lawyers/accountants would be careful to make themselves aware of the nationality and tax situation of the deceased as they would be ultimately responsible? Would they be liable to a claim from a foreign government?
I do know I was advised NOT to make any US person an executor of my will (or any foreign will) as they would have signature over my accounts which would then have to be reported to the IRS. I am no longer a US person!
Hmm. My plan (to arrange my metadeath affairs in such a way as to avoid lawyer interference) has hit a snag.
Need to find someone other than my children to notify SSA and pay back any overpaid benefit.
I guess that’s going to have to be a lawyer, but will a lawyer touch it if they’re not doing the probate? Probably not.
Sigh.
Heidi – “I would suppose that ‘all taxes due’ would include foreign taxes. I would expect that lawyers/accountants would be careful to make themselves aware of the nationality and tax situation of the deceased as they would be ultimately responsible? Would they be liable to a claim from a foreign government?”
They’re probably always subject to ML/tax evasion/terrorist financing laws, and especially in any situation with an international aspect.
Even taxes owed to Eritrea?
I’d love to get a legal opinion of that in the US.
I don’t know. It would have to be accounted for in some way, if it was tax owed on Eritrean-source income. Maybe if the country the tax is owed to is under US/EU sanctions, payment is blocked.
Eritrea’s murderous CBT taxes would not be legally due, let’s hope.
@monalisa
Yes it was me that was given the run around by the IRS when i called to check on the status of my filing and form 8854. i filed my final paperwork in March 2017 and rang up in May 2017 to find out if they had my tax return. While they would confirm that they had my tax return, they would not confirm if that included the form 8854. They told me all my paperwork and been moved to another building to be checked over. this gave me a scare because i thought they meant for possible audit. then i learned what the advisor meant was moved to a building for processing. then i called a couple of months after august 2017 and everything confirmed as processed. so in the end i had confirmation.
Still as others said here, decades from now who knows what they would say unless you can prove you renounced and filed form 8854. can heirs request back filing information that far back? in my will i will have my CLN and form 8854 regardless of whether or not I have US heirs.
Also what i find surprising is that these rules existed for decades, no one knew about CBT until Fatca and yet non compliant people have passed away all these years and left assets to US persons or others with no consequences. or the reverse, compliant US residents left to non compliant us persons abroad with no consequences or certainly it has never been an issue highlighted anywhere that i can think of. Fatca must be playing a part now in this new trap.
Thanks for the answers. More or less as I expected. This is the one area that concerns me. It’s dead easy to remain non-compliant when you are the one in control, but not so easy when you are in fact dead.
As with other aspects of compliance, it still seems very voluntary. The US has no way of knowing about any of this if the departed US person is non-compliant and hasn’t been identified for FATCA purposes, but if an executor (or lawyer or accountant) catches a bad case of the paranoias, they’ll go running to the IRS.
If I pre-decease my spouse, no problem, it’s all joint property so no probate I think. But if we both go at the same time…