RESP for Canadian/US dual citizen beneficiary

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bandana
Posts: 16
Joined: Sat Jun 25, 2011 9:41 pm

RESP for Canadian/US dual citizen beneficiary

Post by bandana »

My daughter is a US/Canadian dual citizen with an RESP. My wife, who contributes to the RESP, is NOT a US person and neither am I.

What forms, if any, need to be filed with the IRS for my daughter's RESP? She is only 8 and is not yet receiving any distributions from the RESP.

Thanks for your help. Most resources around RESPs are targetted at contributors who are US persons which is different from my situation where only the beneficiary is a US person.

Thanks!
oakweather
Posts: 27
Joined: Thu Oct 15, 2020 1:00 pm

Re: RESP for Canadian/US dual citizen beneficiary

Post by oakweather »

to clarify: the information in the link above may not exactly help in your case, but it may make some of your questions moot
bandana
Posts: 16
Joined: Sat Jun 25, 2011 9:41 pm

Re: RESP for Canadian/US dual citizen beneficiary

Post by bandana »

oakweather wrote:
> to clarify: the information in the link above may not exactly help in your
> case, but it may make some of your questions moot

Thanks for the reply. I understand the the 3520/A are no longer needed, and would not have been anyway as the contributor is a non-US person.

What about FBAR? Does my subscriber daughter have to file that annually?

Thanks again.
oakweather
Posts: 27
Joined: Thu Oct 15, 2020 1:00 pm

Re: RESP for Canadian/US dual citizen beneficiary

Post by oakweather »

I am most definitely not an accountant or tax lawyer. But my understanding is that FBAR, 8938, etc. are normally for account holders or those with signatory power over the account to file (e.g. parents). I do not believe that your daughter currently holds the RESP account. As long as the account holder/signatory is not a U.S. person (citizen or resident who file with the IRS) then you should not have to do FBAR.

It is unknown to me whether there may be other forms to file beside FBAR, 8938, and 3520/A.

If/when your daughter receives the distribution from the RESP as a beneficiary, obviously that will be considered a taxable event both to the CRA and to the IRS (if your daughter remains a U.S. person at that time). It is also unknown whether there are additional forms to fill beyond 1040. Perhaps others on this forum can elaborate.
Ron.Henderson
Posts: 81
Joined: Sun Jan 06, 2019 2:24 pm

Re: RESP for Canadian/US dual citizen beneficiary

Post by Ron.Henderson »

If neither you nor your wife are US citizens, is your daughter is an "Accidental American" - a dual citizen by virtue of having been born in the US? Since you don't claim to be US persons either, are you living in Canada?

If both assumptions are correct, please do your daughter a big favour by *not* introducing her to the IRS as a minor. That should be her decision to make at age 18. She has options: she could move to the US, or renounce her US citizenship, or opt for full US tax compliance as a non-resident, or simply ignore US filing requirements (a perfectly safe and reasonable course of action for a Canadian citizen living in Canada with no US assets or income sources).

As to your question, the beneficiary of the RESP has no Canadian tax paperwork to deal with until they begin receiving payments. I would apply the same principle to US tax paperwork. (Even after they start university, they do not control the account. The contributor requests withdrawals on their behalf. A portion of the payments will be taxable income for the beneficiary. But you don't need to know this for another 10 years.)
ND
Posts: 291
Joined: Thu Feb 21, 2013 5:28 pm

Re: RESP for Canadian/US dual citizen beneficiary

Post by ND »

oakweather- But my understanding is that FBAR, 8938, etc. are normally for account holders or those with signatory power over the account to file (e.g. parents).
your understanding is incorrect. Treasury considers mere access to an account as requiring FBAR. In its FBAR webinar, Treasury said that if your foreign-country relative lent you their bank ATM card to withdraw money one time only while a tourist there, you'd be required to include that account in your FBAR.
bandana
Posts: 16
Joined: Sat Jun 25, 2011 9:41 pm

Re: RESP for Canadian/US dual citizen beneficiary

Post by bandana »

Ron Henderson: "is your daughter is an "Accidental American" - a dual citizen by virtue of having been born in the US? "

Yes - that is exactly her status. And my wife, daughter and I are Canadian and living in Canada which is our home. The reason I would like to be in compliance with the IRS is because it is quite possible that she will attend a US university as opposed to one in Canada. So I don't want her to face problems down the road in such an eventuality.

ND - Thanks for your post about FBAR.

Most resources online consider RESPs as foreign grantor trusts, but if the contributor is a non-USP, then it cannot be a foreign grantor trust. Besides, there is some debate whether RESP's are trusts at all given that the contributor has complete control over it.
Ron.Henderson
Posts: 81
Joined: Sun Jan 06, 2019 2:24 pm

Re: RESP for Canadian/US dual citizen beneficiary

Post by Ron.Henderson »

Your daughter can easily deal with any US tax issues when and if she moves south - no need to rat her out any sooner than necessary.

I don't actually believe that she would have any reporting obligations for the RESP as the beneficiary, but in any case, RESP accounts are not subject to FATCA reporting, per the terms of the Canada-US agreement.

You are presumably aware that US universities cost a ******-ton of money and unless it's a really good one, not worth the premium. Grad school is another matter, because there's usually support. My own dual-citizen child - fully non-compliant and fortunate not to have a US birthplace - was told in no uncertain terms that she could do her undergraduate degree anywhere in the world - *except* the US.
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