Non Resident executor of a Canadian estate

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saldanch
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Joined: Fri Jul 14, 2017 4:06 pm

Non Resident executor of a Canadian estate

Post by saldanch »

My mother wants to name me executor of her estate when she passes, but there is a possibility that I am a non resident of Canada when she passes away. I understand that there could be tax implications of naming a non resident executor of a Canadian estate, in that the estate would be deemed to be a non resident estate since the control and decision making is taking place somewhere else. Would the estate be taxed in and income taxes filed in the country in which the executors are residing/paying taxes?
nelsona
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Post by nelsona »

You are on the right track, just going the wrong way:

The issue is more that YOU, as a then-US resident, would be in control of a foreign trust since the estate will remain Cdn, regardless of who or where the executor is.

That is reason enough, in my opinion, not to be the executor. It would be best to have another relative, or better yet, someone else in Canada who NOT inheriting.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
saldanch
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Joined: Fri Jul 14, 2017 4:06 pm

Post by saldanch »

so to be clear, no implications for the estate of having a non resident of Canada as executor of the estate? Or are there implications on the estate only if the non resident executor is also the beneficiary? The estate pays taxes in Canada (Mom is a Canadian citizen and resident and all assets are Canadian assets with the exception of US stocks) no matter who the executors and beneficiaries are?

As for the US taxes, to clarify: if I am resident in US (i.e. US taxpayer) at the time my mother passes away, the US government will deem me to be in control of a foreign trust and therefore they will tax me or the estate? Are there not foreign tax credits if the estate already pays taxes to the Canadian government? I would file a trust form in the US to confirm that I am executor of a foreign trust, but I would not have to pay any taxes and I would be able to show the estate paid taxes in Canada and the remainder was split among the beneficiaries (of which I am one) and I would not be taxed for this inheritance?
nelsona
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Post by nelsona »

Your mothers estate will pay all Cdn taxes owing at death, and any US taxes if she has US holdings. There never is US inheritance tax for a US person inheriting regardless of the source.

However, there are US REPORTING implications for being the executor of a foreign estate, namely foreign trust issues (Form 3520, etc) it could be a reporting nightmare for you as executor.

So, best to have a Cdn executor.

The advice -- not a requirement -- to have an executor who is not a beneficiary of an estate is simply a general one applying to all estates, in my opinion.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
cnytax
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Post by cnytax »

I'm in exactly the same situation as the OP. U.S. resident, listed as executor for mother's estate in Canada.

I am seriously considering in refusing to be executor for reasons listed above. My sister is listed as a second in line if I refuse and she is Canadian resident.

However, I am a beneficiary of that foreign estate as well and my well have to file Form 3520 if I receive more than some threshold amount which I can't recall.
saldanch
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Joined: Fri Jul 14, 2017 4:06 pm

Post by saldanch »

Aside from the US reporting requirements (depending on the size of the estate), how does Canada view the estate? Does the CRA consider the estate to be non resident because the executor who controls the estate and makes the decisions is a non resident? If so, what are the implications of that classification? Would the tax accountant/executor in Canada need to file anything with the CRA to ensure the estate remains based in Canada and subject to Canadian tax given the deceased was a resident of Canada at time of death?
cnytax
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Joined: Sat Jul 16, 2011 11:28 am

Post by cnytax »

If I were to remain the executor, one of my duties would be to file a "final" Canadian tax return on my mother's behalf and pay all remaining Canadian taxes from the estate. I'm assuming that the estate would still be my mother's and the estate would be "resident" in Canada. So CRA would continue to view it as a Canadian estate in my view. They certainly will want their taxes.

When my mother-in-law passed away a while back, all her brokerage account statements were titled "Estate of XXXXX" even though my wife was the executor and stood to inherit everything.

I think the deceased "owns' the Estate until things are probated, taxes paid, etc. So it would have to remain in the country of origin for that to occur.
nelsona
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Post by nelsona »

The estate remains Cdn. It is the US that views the estate as foreign, not Canada.

The reporting threshold for a foreign inheritance (which is simply a foreign gift), is US$100K or more, reported on form 3520.

The reporting requirements as executor, are not the same, although on the same form, different section. Now, you would be a trustee of the foreign trust, and subject to reporting requirements that are not a simple as saying I got $200K from my mother.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
cnytax
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Joined: Sat Jul 16, 2011 11:28 am

Post by cnytax »

Just out of curiosity, which one of the 4 Parts of 3520 is applicable to a U.S. person who is the executor of a Canadian estate?
nelsona
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Post by nelsona »

I'll let you satisfy your own curiosity.
It may also include 3520-A.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
cnytax
Posts: 51
Joined: Sat Jul 16, 2011 11:28 am

Post by cnytax »

saldanch,

It appears that you and I are in the same situation on this. If you wish to converse privately on this, please contact me at wmwilliam67@gmail.com
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