RESPs with U.S Citizen Subsciber--any hope?

Diskdoctor · Post by **Diskdoctor** » Thu Apr 22, 2010 8:49 pm

I just came across that naturalization thing today too. I don't think it will apply to us since the American grandparent currently lives in Canada as well but it's good to know about these things anyway.

kerry · Post by **kerry** » Thu Apr 22, 2010 10:07 pm

If I ask my sister who is Canadian only open the new RESP accounts for my kid, and I transfer RESP to that account with the same beneficiary. so, I do not have to file 3520 or 3520A in the future anymore, right ?

eortlund · Post by **eortlund** » Fri Apr 23, 2010 9:20 am

Well, that American grandparent met the physical presence test when it came time to pass US citizenship to your spouse. So perhaps that is enough and it doesn't matter where he/she currently lives.

nelsona · Post by **nelsona** » Fri Apr 23, 2010 9:34 am

No, they must currently live in US.

eortlund · Post by **eortlund** » Fri Apr 23, 2010 9:42 am

Oh--good to know.

JohnSt · Post by **JohnSt** » Mon Apr 26, 2010 1:02 pm

Though I am not a lawyer, it's important for US citizens to keep up with the law on the RESP issue (among all the other issues, such as the all new FBAR-type new filing requirements).

Technically, the latest changes on trust law will disallow a simple transfer of your RESP to your Canadian spouse, because the new law applies a VERY wide net to catch any US citizen children who "might" benefit at some point in the future.

See here for a short summary (scroll to the end): http://www.shearman.com/files/Publicati ... -Rules.pdf

My soapbox part: The ability of the IRS to police the citizenship of a non-US discretionary trust owner remains to be seen. My guess is they would try to do this using a W8-BEN or W9 type of declaration -- which some Canadians must submit. However, such documents are applicable to anyone dealing with US securities only. Can you imagine a Canadian brokerage, say TD Waterhouse, asking all Canadians with RESPs to declare they do not have US citizen children? That would be akin to the CRA asking Americans to confirm that they are not Canadian. Utterly ridiculous.

nelsona · Post by **nelsona** » Mon Apr 26, 2010 1:23 pm

"trust law will disallow a simple transfer of your RESP to your Canadian spouse"

Not sure you meant this.

The new law would not disallow the transfer. What it might do is prevent the trust from avoiding 3520 reporting, which was the goal of the transfer.

JohnSt · Post by **JohnSt** » Wed Apr 28, 2010 7:19 am

Nelsona -- good clarification, thanks.

MaggieA · Post by **MaggieA** » Sun May 23, 2010 8:15 am

My attention was caught by the posts here about recent changes in US laws. I'm wondering if I have any reason to be concerned.

My parents (Canadian citizens resident in Canada) have a family RESP with beneficiaries including my daughter (GC holder resident in US) and her cousins (Canadians resident in Canada).

1. Does the new law "catch" this RESP and impose a reporting requirement in the US?

2. What if my daughter becomes a US citizen before starting university?

nelsona · Post by **nelsona** » Sun May 23, 2010 10:27 am

1. This applies between spouues.
2. Should not make a difference, US GCs are treated exactly the same as US citizens.

MaggieA · Post by **MaggieA** » Sun May 23, 2010 12:31 pm

Thanks!

Diskdoctor · Post by **Diskdoctor** » Tue Jun 15, 2010 2:04 pm

[quote="nelsona"]"trust law will disallow a simple transfer of your RESP to your Canadian spouse"

Not sure you meant this.

The new law would not disallow the transfer. What it might do is prevent the trust from avoiding 3520 reporting, which was the goal of the transfer.[/quote]

So what would be the reporting requirements? I assume the concern from the IRS would be that you're just trying to avoid taxes. This would only be partially true. Most of us are just as interested in avoiding the reporting requirements which if we'd known about them in the first place we wouldn't have bothered. Depending on what's involved this is what I would like to do - get all the RESPs with me as the sole contributor. I'm only Canadian and the kids are only Canadian so as long as we stay in Canada things should be straightforward.

nelsona · Post by **nelsona** » Tue Jun 15, 2010 2:40 pm

Not sure what "only Cdn" would meean. If you are married to a USC, you are of interest to IRS.

Diskdoctor · Post by **Diskdoctor** » Tue Jun 15, 2010 3:30 pm

I'm of interest but I don't have to file FBAR and 3520 documents every year.

nelsona · Post by **nelsona** » Tue Jun 15, 2010 3:42 pm

The new rules would force you to file 3520 if your USC spouse would transfer an RESP to you.