Estate Tax on CDN and Survivors Benefits

CyclingChick · Post by **CyclingChick** » Mon Oct 15, 2012 11:22 am

I apologize if this topic has been covered before. I could not find it so am posting this.
I am a CDN citizen, legal US resident married to an American citizen. We have been living here in the states for about 10 years. He is working, I had very little work (under one year part time) here. He is now retiring. We had initially planned to move to Canada when he retired but house prices made him say no to that plan.
I am concerned about income should he predecease me. If he were to die, I would want to move back to Canada. I have found out though, that his estate would be taxed by US IRS 35% now and could be 55% in 2013. Can I avoid that without taking out American Citizenship? I have heard about setting up a Trust but do not know anyone that has done this so don't know how expensive that is or how that works.
Also his employer has "Survivor Benefits" options when he retires and if we do not take that he will get about $6000 a year more in pension. If we do take it and he predeceases me I would get about $30,000 a year. Given that his estate may be taxed heavily if he dies and I move back to Canada is it a better idea in terms of taxes to take the Survivors Benefit?
I have very little money of my own and so without having something of our joint American assests to provide for me should he die I would be in trouble financially.

nelsona · Post by **nelsona** » Mon Oct 15, 2012 11:52 am

I think you need to sit down with a US estate planner. The simplest would be for you to just take US citizenship. But even without this His estate of less than $1M would still be exempt, and this will probably be pushed back up to $5 million. This would have impacted you regardless of whether you moved to canada or not, so that option is immaterial.

Any particular reason you don't want US citizenship?

CyclingChick · Post by **CyclingChick** » Mon Oct 15, 2012 1:37 pm

We did have an appointment with a U.S. estate planning lawyer. I got the feeling however that he was not sure about tax issues and Canada. He was kind of evasive on costs of Trusts too. So His estate under 1M would not be taxed in the U.S. at 35%?

I don't really want to take out U.S. citizenship. For one reason I heard that U.S. citizens are taxed no matter where they live so once you become a citizen you are tied to U.S. taxes. And also because I just don't feel loyalty to U.S. if it were not for my husband I would live in Canada so taking the citizenship would only be because of money.

nelsona · Post by **nelsona** » Mon Oct 15, 2012 1:46 pm

There are other benefits, of course. mainly, You might want to live in canada OR US, which you could not do if you give up Green card (which would occur after about a year outside US), but I do see your point Most would have gotten it years ago, so abviously not something you want to do, baut as you are realizing, plans change. Few people living in canada pay US tax.

There are many estate lawyers that deal with non-citizen spouses. You need to ask them about this before sitting down with them. If they don't know about QDOT, move on.