I am a dual Cdn/US citizen. My spouse is a NRA.
Were he to be the first to die his RRIFs could be rolled over to me on a tax free basis in Canada. For Canadian tax purposes I would be taxed on subsequent withdrawals. For US reporting is all that would be required at the time of rollover is that it be reported on a 3520 as a gift/inheritance over $100,000 from an NRA. How would subsequent withdrawals be reported on my US return? Would I defer inside buildup on an 8891 and treat the inherited value as a contribution?
Were I to be the first to die similarly in Canada my RRSPs/RRIFs could be rolled over to him on a tax free basis. When he withdrew funds they would be reported on his Canadian tax return. But what about the US? Must the full value of my RRSP be taken into income in the year of my death on my or my estates tax return or is there some method under which the rollover is recognized by the US and what is the procedure.
Thank you.
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RRSP/RRIF Rollover
Moderator: Mark T Serbinski CA CPA
If you were to inherit the RRSP/RRIF, you would file a 3520 for the foreign gift, and then 8891's subsequently (including the year of death). I would agree that the tax-free portion would be the inherited value, unless a portion of the RRSP/RRIF inheritance was a LIF/LIRA, in which case that portion would remain 100% taxable in US, upon withdrawal.
If HE were to inherit your RRSP, your estate would, as with all your assets, report it on an estate return, and that would be it. That is the point of estate tax. Of course, since he is NRA, the estate tax exemption is reduced, so whther there is estate tax will depend on what other assets you have at death, and what the limits are at that time.
But there would be no US income tax on that, just like there would be no income tax on any of your other holdings. That;s the difference between US and Canada.
If HE were to inherit your RRSP, your estate would, as with all your assets, report it on an estate return, and that would be it. That is the point of estate tax. Of course, since he is NRA, the estate tax exemption is reduced, so whther there is estate tax will depend on what other assets you have at death, and what the limits are at that time.
But there would be no US income tax on that, just like there would be no income tax on any of your other holdings. That;s the difference between US and Canada.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Thank you for response.
Re: Scenario one - treatment sounds reasonable. Only issue for me would then be when I go. Then I will have to think thru consequences to the extent I leave assets to child (a dual US/Cdn) and/or grandchild (a NRA since my child left the US under age 1). Given my estate would be under $5million assume I would not have to file an estate tax return, son would have to file a 3520 if amount over $100,000 and there would be nothing to be done by grandchild? Presume when I die all remaining RRIF assets would be brought into income on both Canadian and US returns (or only Canadian given your comment on income tax) . Make sense?
Re: Scenario two. Am I correct that if my estate is under $5 million I would not need to file an estate tax return regardless of who the beneficiaries are.
Your response states that since he is an NRA the estate tax exemption is reduced. I was not aware of that I thought it was based on the decedent. Or are you referring to when he later dies if his US located assets were over say the current exemption of $60,000 his estate might have to pay estate tax on those US assets over the exemption.
Re: income tax...is what you are saying is that the IRS will never collect tax on the RRSP income which has been being deferred with 8891s.?
Regards,
Re: Scenario one - treatment sounds reasonable. Only issue for me would then be when I go. Then I will have to think thru consequences to the extent I leave assets to child (a dual US/Cdn) and/or grandchild (a NRA since my child left the US under age 1). Given my estate would be under $5million assume I would not have to file an estate tax return, son would have to file a 3520 if amount over $100,000 and there would be nothing to be done by grandchild? Presume when I die all remaining RRIF assets would be brought into income on both Canadian and US returns (or only Canadian given your comment on income tax) . Make sense?
Re: Scenario two. Am I correct that if my estate is under $5 million I would not need to file an estate tax return regardless of who the beneficiaries are.
Your response states that since he is an NRA the estate tax exemption is reduced. I was not aware of that I thought it was based on the decedent. Or are you referring to when he later dies if his US located assets were over say the current exemption of $60,000 his estate might have to pay estate tax on those US assets over the exemption.
Re: income tax...is what you are saying is that the IRS will never collect tax on the RRSP income which has been being deferred with 8891s.?
Regards,
I will only say that, (a) as a NRA you do not get all the exemption that a US citizen spouse would get. That is well known.
Your husband's estae would have to file an estate tax return when he dies. You would have to file an estate tax return whwn you die if you have US property.
Your husband's estae would have to file an estate tax return when he dies. You would have to file an estate tax return whwn you die if you have US property.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Sorry Ithink I got a bit confused. You are the USC correct?
So, reveres what I said. You will be subject to estate tax when you die, your spouse will be when he dies only if he has US property, as then defined. Doesn't matter the order.
I won't go into wether you will or wil not need to file esate tax return, nor what the thressholds are, except that non-USC spouse/heirs do indeed have lower limits. It is the recievers citizenship that matters, since an NRA would not be subject to "global" estate tax, thus IRS wnats to get at that money when the USC dies.
If you die why would your child (or anyone else) have to file a 3520? You are not foreign.
When YOU die, the RRSP you inherited from your deceased spouse would *probably* not be income taxable in US. It would be in Canada.
Hope this hasn't muddied the waters further.
So, reveres what I said. You will be subject to estate tax when you die, your spouse will be when he dies only if he has US property, as then defined. Doesn't matter the order.
I won't go into wether you will or wil not need to file esate tax return, nor what the thressholds are, except that non-USC spouse/heirs do indeed have lower limits. It is the recievers citizenship that matters, since an NRA would not be subject to "global" estate tax, thus IRS wnats to get at that money when the USC dies.
If you die why would your child (or anyone else) have to file a 3520? You are not foreign.
When YOU die, the RRSP you inherited from your deceased spouse would *probably* not be income taxable in US. It would be in Canada.
Hope this hasn't muddied the waters further.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Just to muddy things a little more, don't forget that thre is an estate income tax form (1041) as well as an estate tax retuurn (706). These have different purposes and filing requirements.
Since your heirs, other than your living spouse, cannot inherit an RRSP (it must be liquidated by the estate), it is quite probable that this would be considered income for IRS purposes. This is different that US plans, or any number of other assets that can be passed intact to any your heirs (assuming the estate can pay the required Cdn income tax).
Since your heirs, other than your living spouse, cannot inherit an RRSP (it must be liquidated by the estate), it is quite probable that this would be considered income for IRS purposes. This is different that US plans, or any number of other assets that can be passed intact to any your heirs (assuming the estate can pay the required Cdn income tax).
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best