I’m a US citizen living in the US with a Canadian rental property. I’ve been advised to consider transferring all of my property to a trust to avoid potential US Estate tax. I’m currently way under the estate tax exemption limit, but may reach that amount in the distant future, or the government could substantially lower the threshold. I’m trying to decide if it’s really worth all the trouble and extra costs to arrange my affairs in this matter.
I did some of my own research on this topic and I think the Canadian rental property will be deemed to be disposed on the transfer to the trust and I will have to pay tax on the gain at that time, but I’m not 100% sure.
I’m compliant on all of my Canadian reporting requirements for the property (25% withholding, S.216, etc).
Does anyone know if:
1) The property is deemed to be disposed on transfer
2) I would be required to abide by CRA’s non-resident sale requirements on the transfer (apply for a certificate of compliance)
Transfer Canadian Rental Property to a Trust
Moderator: Mark T Serbinski CA CPA
is the person advising you to do this going to make some money arranging this trust? If so, get a second opinion.
From a tax point of view I do not see the need to do this. Your rental will be subject to taxes in Canada when you die, so shielding it from the possibility of US estate tax is pointless, since that tax will surely outweigh any US estate tax. Any other trust transfer would
As to the taxability of the transfer, if it is transferred to a spousal trust, then no tax is immediately due in Canada. Of course, this may be considred a gift subject to US gift tax, or perhaps other immediate US tax consequences. That, and the mechanics, would be for a CROSS-BORDER specialist to determine.
But, if the reason is primarily (which is the reason you lead with) US estate tax savings, I don't see the need.
From a tax point of view I do not see the need to do this. Your rental will be subject to taxes in Canada when you die, so shielding it from the possibility of US estate tax is pointless, since that tax will surely outweigh any US estate tax. Any other trust transfer would
As to the taxability of the transfer, if it is transferred to a spousal trust, then no tax is immediately due in Canada. Of course, this may be considred a gift subject to US gift tax, or perhaps other immediate US tax consequences. That, and the mechanics, would be for a CROSS-BORDER specialist to determine.
But, if the reason is primarily (which is the reason you lead with) US estate tax savings, I don't see the need.
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Thanks!
Yes, the person advising me on this will be paid. This is why I’m trying to do my own research to determine if this makes sense. I was told the primary reason I should do this is for estate tax purposes.
Why would eliminating the estate tax be pointless? Is this because I will be able to use the tax I pay to Canada as a credit against the US estate tax when I die?
I do not have a spouse, so I guess this will be taxed upon transfer and I will have to abide by CRA’s non-resident selling requirements. Sounds like it would be taxed in the US upon transfer as well. If it’s not, perhaps there is a way to elect that it is, so the timing is the same for foreign tax credits?
I never even considered the gift aspect. Would this only be applicable if I transferred it to a spousal trust, or any trust?
Yes, the person advising me on this will be paid. This is why I’m trying to do my own research to determine if this makes sense. I was told the primary reason I should do this is for estate tax purposes.
Why would eliminating the estate tax be pointless? Is this because I will be able to use the tax I pay to Canada as a credit against the US estate tax when I die?
I do not have a spouse, so I guess this will be taxed upon transfer and I will have to abide by CRA’s non-resident selling requirements. Sounds like it would be taxed in the US upon transfer as well. If it’s not, perhaps there is a way to elect that it is, so the timing is the same for foreign tax credits?
I never even considered the gift aspect. Would this only be applicable if I transferred it to a spousal trust, or any trust?
Yes, the taxes you would pay in Canada would be credited against US estate tax, by treaty.
I assume this was a US-based advisor, and there is plenty of information about these trusts in US for you to make an informed decision about such trust for US-based property.
I'm also going to assume that he knows NOTHING about the ramifications of putting a Cdn property in a US trust, regardless of the merits of the US reasons.
I assume this was a US-based advisor, and there is plenty of information about these trusts in US for you to make an informed decision about such trust for US-based property.
I'm also going to assume that he knows NOTHING about the ramifications of putting a Cdn property in a US trust, regardless of the merits of the US reasons.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing