Banking Issues
Please provide information or ask questions about Banking issues in this comment stream.
I will create sub-topic threads as the situation arises, keeping a copy of the comment that starts a legnthy specific discussion on the Banking Issues thread, so the Banking Issues thread will remain the main source for banking information and dicsusion. But sub-topic threads should help people easily find (or avoid, if it doesn’t interest them) detailed information and conversation on specific matters.
Sub-topic Threads:
Problems with Banks After Renunciation
Clearly an argument for a CLN. Another problem arises when a US citizen acting as an executor tries to open a bank account. I suppose the answer to all this depends on whether the person”s estate can successfully argue for a pre-2004 relinquishment.
With whom would the estate be arguing?
Overall, we’ve really heard very little on this subject, which suggests to me that it might not be a significant problem (yet).
I suppose it’s possible that if a bank saw a US birthplace on a death certificate, they might ask questions about citizenship, and FATCA the account until it is closed. So the account gets reported once or twice; not ideal, but not the end of the world either, as it’s unlikely the IRS would suddenly notice and decide to release the (toothless) hounds.
The bigger danger is having the executor panic (even if they themselves are not a US citizen) and decide to bring a Canadian estate into US tax compliance. Expense and delay, I expect.
Although its commonly done, its unwise to publish obituaries in the papers. (I was told this by a professional whose opinion I respect.) There are plenty of scammers out there who watch the obits to harvest personal details which they can then use for nefarious purposes. I’d be a lot more worried about the crooks than the IRS. Why spend a lifetime trying to guard your personal data only to have your survivors publish it all in an obituary?
As for FATCA reporting, if the bank even asks, a simple “he lost his US citizenship decades ago when he became a Canadian” would probably do. (I.e, a reasonable explanation.) As USCA said above, a CLN would be the clincher. In the worst case scenario, even if the bank reports to the CRA and they report to the IRS, its not likely to go any further. I recall a former participant here at Brock who gleefully claimed to have stopped the IRS dead in its tracks by getting himself a rubber stamp and stamping “DECEASED” on IRS letters before he returned them to the sender.
The executor opens a new bank account is asked the usual questions. This has happened and will continue to happen …
And possibly US taxes, yes?
That’s why a great deal of thought should go into planning for the death of US born people. The problems of US citizenship can arise on the level of each of the executor and the estate itself.
Some possible good practices might include:
On the level of the deceased:
Avoid probate, transfer assets while still alive. Probably not a good idea to have assets in the United States.
On the level of the executor:
Probably best to avoid a US person executor. At the very least they will have FBAR obligations.
Like all issues of “USness”, the Estates discussion will be driven by the accountants and lawyers who are the administrative gatekeepers of the compliance world. The problem of the death of the US citizen living abroad has numerous dimensions.
Viewed from a strictly legal perspective, there are numerous issues. Here is a link to an article by a highly regarded “Estates” lawyer. It’s amazing how many issues she raises …
https://www.mondaq.com/canada/Family-and-Matrimonial/685076/Cross-Border-Canada-US-Estate-Administration-Highlights
Panic is not appropriate. But, the attitude that this is not a potential problem is ridiculous.
@ USCitizenAbroad,
Re:
Good advice, IMO. That’s pretty much my take.
Over 30 years after the US has been nothing but an occasional vacation destination in my, and my family’s, life, suddenly FATCA appears.
The US once told us that people lose (or had lost) our citizenship upon becoming Canadian. I’m one of those. Suddenly the US is trying to claim we didn’t lose our US citizenship. In 2012, some US govt employees even tried to block my CLN application, despite my 4079 being a text-book case of non-citizenship.
I have had no income of any sort from the US for decades and, since 2011, purposely do not invest in the US. But, more recently, I was startled to receive a small inheritance from a distant US relative. It came directly, not through the estate; so, though I’d planned to stay off-the-radar for the rest of my life, I had no choice but to go on the radar. (BTW, I filed as an alien, which I am, and paid the exact amount owing. I never heard a word back.)
In sum, I don’t worry about my US birthplace, at all. I’m safe. But you never know what might happen – and if you have a US birthplace, or US citizenship, real or alleged, it could be relevant in your future. Things change, laws change; and regulations and procedures can be tweaked and changed fairly easily.
With US-born persons who are safe at this time, I often advise don’t do anything, you’re fine; but check the site a few times a year in case there’s any changes, or proposed changes, that might affect you.
A measure of prudence is required. The key consideration is having an executor aware of the deceased’s US person status, so they are not surprised, with a clear plan for how to deny it, if that is the chosen course of action. And definitely do not ask a US person to be executor if that can be avoided.
The overview from the estate lawyer was useful, though of course she did not mention what does and does not happen when US person status is ignored, nor does she admit that over 90 percent of US persons in Canada would not have been compliant with US tax filing obligations.
At this point in time, having a US birthplace always has the potential to be a problem. Nothing more than a place name listed on an ancient piece of paper has the potential to wreak financial havoc, even if the individual’s life has no connection to the US and hasn’t for decades. A CLN would always be nice but they are expensive and presently impossible to get.
In recognition of this ridiculous, totally unnecessary, US-created problem, non-US governments around the world need to step up, protect their citizens, and pass legislation to allow official birthplace changes. A person’s name is far more associated with their identity than the place they came into the world a lifetime ago and they already allow official name changes, so why not? Problem solved.
@Ron Henderson
Why would you imagine that the Estates lawyer who wrote the article has any knowledge or concern about the percentage of noncompliant US persons in Canada? The problem is that these people can be expected to follow the law.
Some potential executors will lie and some won’t. I think what you are really saying is that it’s important to find an executor who will do his/her best to deny “US person” status. Of course the executor might be taught that relinquishments prior to June 3, 2004 would provide justification for the deceased NOT being a “US Person”.
There is a way to solve all of this and that’s to get a CLN.
Also, many people renounce because they do NOT want to leave these problems to their heirs. Not everybody wants to put their heirs/executors in a position where they are lying …
Out of curiosity, when an executor opens an account for the estate, does the bank as about the US citizenship (and any other tax residency) of the executor, the deceased, or both?
Definitely easiest to provide a CLN, but not everyone can afford to renounce, or thinks of it in time. Given how little we hear of this issue, I’m wondering how often banks, accountants or lawyers flag it and demand some sort of action. Hopefully not often.
I can tell you with certainty that at least some banks do. There is nothing in the IGAs that appears to exclude this kind of account. From this point the descent begins …
1. Why are you asking?
2. What do mean US citizens in Canada are taxable in the US?
3. OMG the decedent was a US citizen.
This is a very serious issue, made more serious by the complexity and number of participants in the process. The best practice is possibly to take steps to avoid having an estate at all. This can be done (in part) by keeping the main assets in joint tenancy (meaning they pass automatically to the other joint tenant on death).
Good discussion about US Person estate issues etc.
With respect to what I was most curious about, ie. does a bank FATCA report the accounts of deceased persons once it becomes aware of the US birthplace from the death certificate, it seems that we really don’t know. Perhaps it varies from bank to bank, or even from branch to branch of the same bank, depending on the knowledge and interpretation of the individual bank employee(s) involved.
For those of us who don’t have a CLN, and who feel that it is in our best interest to never set foot inside a US Consulate, I certainly agree with maz57 that it is important for the family/estate to maintain a firm consistent position that the deceased person was not a US citizen at the time of death. I also agree with USCA that much of one’s estate should be transferred before one’s death, if possible.
Being a self-relinquisher, I’ve got to wonder how that will play if or when a bank starts the inquisition process. One thing is certain, banks are not experts on the vagaries of US citizenship law. Seems like another one of those situations where a “reasonable explanation” would most likely suffice. The banks I’ve dealt with myself seem embarrassed to even ask and always seem relieved when they get answers which save them the trouble of going down the US citizen rabbit hole.
Rereading the comments for the last few days …
For this with a US birthplace this needs to be anticipated as a problem. The family/representative/executor must be prepared with an explanation for why someone is not a US citizen. The FATCA IGAs (although the issue is not quite the same) allow the banks to accept a reasonable explanation for why one has relinquished US citizenship but does not have a CLN. Those relinquishing prior to 2004 should be prepared to explain that relinquishment … It would be worth thinking this through well in advance.
Of course, the best thing would be to die with nothing but debts.
Worst case, I imagine, is the bank doing FATCA reports on the estate account for one or two years (depending on when the process starts and finishes); I’ve never seen a provision for retroactive FATCA reporting of previous years.
The IRS can’t really do much with that information; the bigger danger is probably having the accountants/lawyers/bankers scare the executor into US tax compliance by telling them that they would be personally liable for the estate’s US tax obligations.
So again, if born in the US, don’t leave your executor in the dark. Either buy a CLN (with the 2020 coronavirus discount if so inclined) or make sure everyone has their story straight.
Yes, its one thing to make some bad decisions and create a mess that you must clean up yourself, but its quite inconsiderate to create a mess that your survivors are left to deal with. I’m thinking a notarized statement that explains how and when US citizenship was lost would be the next best thing to having a CLN. This statement could include the relevant US law chapter and verse plus the Canadian naturalization certificate.
This could be placed in the “When I Die” file along with all the other documents that are needed after one’s passing. A previous sworn statement would greatly strengthen that “reasonable explanation” down at the local bank.
Person recently asked citizenship question at a large Ontario credit union (Alterna CU) where they’d been a longtime member (and had never been asked before);
“… you’re only a Canadian citizen right?” or “you only have Canadian citizenship right?” (in the context of a discussion primarily about registered savings, maybe investments in general?).
Account holder said “yes” (has a CLN), didn’t ask why citizenship was relevant, and rep didn’t say more or explain why. Canadian registered savings, TFSAs aren’t supposed to be subject to FATCA reporting under the IGA https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/enhanced-financial-account-information-reporting/reporting-sharing-financial-account-information-united-states/guidance-on-canada-s-enhanced-tax-information-exchange-agreement.html#p6_6 ). Alternatively it is possible that the rep was going to propose some type of Canadian investment pool that might contain some type of US related holdings, but if so, they didn’t explain.
If hear more about context of the question, will report back.
Interesting. Apparently it still happens, though it’s probably quite rare.
When I had my genteel spat with an investment advisor some years back, I said that I didn’t see the point of making any declaration concerning US citizenship when my holdings were exclusively RRSP accounts not subject to FATCA reporting. They did not agree.
Part of that argument concerned my refusal to sign a W-8 or W-9 because I’d rather perjure myself on a bank form than a US government form. In the end they gave up and accepted my denial of US citizenship – a complete lie – via e-mail.
This might all be quite innocent and the bank guy might have been doing his job
There is a poorly understood provision – covered by the Canada -US tax treaty- that any Canadian with more than 60,000 in US assets at the time of death is supposed to submit a US estate tax return. It is important to understand that this applies to all Canadians, not just duals.
In 99.99 % of cases there would be no taxes due because the US has a generous estate tax exemption However, if one chose to obey that particular law, the accounting fees could be onerous .
For example, I might have >60,000 in a US mutual fund with Canadian bank xyz . They could refuse to cash in the fund without proof that my estate had filed a US estate tax . In theory the only way to be completely safe is to avoid US assets or to sell them before you croak. I have had the talk with my investment guy and he assured me it is rarely an issue. But say I have a bunch of Apple or Tesla stock in an online account and I die. My executor goes to sell it and the bank says “whoa, we have a problem – you have to file a US estate tax return.”
Just a warning.
One small data point for the files. Report on Expat Forum today of a young Accidental American in Australia having her bank account frozen because she didn’t supply an SSN. Apparently the bank knew of her US citizenship; she ignored an ambiguous message about supplying tax information, then one day her card stopped working. Unfortunately she doesn’t have an SSN and can’t easily obtain one, thanks to the pandemic.
I am a belgian citizen living in Brusses , Belgium.
I would like to openan acccount at a US based brokerage Companuy ( Fidelity, Schwabb, Ameritrade, vanguard ??? )
I do not want to trade ; I only want o buy USA ETF’s because thery are better than the one offered in Europe .
Is it possible ?
Thanks for your assistance .
Michel
@Polly
I have just come across this FATCA law. I am having a very stressful year as it is – I left my job to move in with my mother who has Alzheimers. My current bank is closing down, and I can’t open a new one because of FATCA. This has really pushed me over the edge, and I came very close last weekend to ending it all. I know it’s a permanent solution to a temporary problem, but right now, FATCA is destroying my life.
I was born in the US to British parents, I’ve been British all my life as far as I’m concerned. We left the US when I was 9 months old (MONTHS). I made no decisions about staying or leaving the US. I can’t even remember being there as I was a baby.
…. and by the way, Polly. I was a happy person before this last year. I enjoyed my life, I was positive. I was saving for a house. Dealing with the Alzheimers has been a huge struggle. FATCA has pushed me over the edge.
Welcome, Sarah,
I’m so glad you found our site. If Polly doesn’t see this — it’s an old thread — I’m sure others will be commenting soon. Many of us have has incredible stress problems with this. I felt like my life, as I’d always known it was over. We’ve given each other a lot of support and we’ve all got through (or feeling much better and much more like ourselves as we get through). Several British people post here and they may have some specific suggestions for banking.
Thanks for the reply, Pacifica777. I’m living in Ireland now and cannot do anything about the bank as I’ve checked this out. It looks like the only option is to give a chunk of my savings to the US to renounce my citizenship. This makes me angry that I should have to pay so much of money that I’ve worked hard for, but there’s something else – it’s like a fear that anything can now be taken from me at any time. I think it’s because it was all so unexpected. Life was normal one day, then the next day you wake up with a new nationality under a different set of rules. I feel less isolated knowing there are more of you out there, but I’m also sorry that there are so many of us in this bizarre situation.
Sarah. You have come to a very helpful site. You will perhaps get a lot of advice, some of it contradictory. One thing we have learned over the past 10 years is that the IRS has no interest and no ability to bother accidental Americans who live outside the US.
They have no budget and no resources to go after unknown persons in GB or Ireland with no prospect of getting a return on their time.
So, try not to stress, don’t rush into anything and listen to our advice. You will be fine.
Firstly, don’t enter the IRS system. They don’t even know you exist. If you give us a little more information we may be able to help with banking.
For example, let’s say you need to open an account at a new bank. Let’s say it is impossible to do that without revealing your birh place. (if you don’t have to reveal it, so much the better).( there is wide agreement that, since the US and the IRS are way offside , it is not necessary to play by their rules)
Back to the hypothetical. Let’s say you are fatca’d and your banking information is sent to he IRS along with about 100 million others. Trust us they would have absolutely no ability or interest in doing anything with the information. It is all done by computer matching. The computers would have nothing to go on.
My spouse was told she would a considerable sum. We almost panicked and almost joined the first amnesty program. We came within days. What a disaster that would have been. In the end, with proper planning, we owed the IRS nothing
Slow down, take your time, listen and learn.
Perhaps this should be on a different thread. Fatca discussion? Accidental Americans? Ireland?