RESPs with U.S Citizen Subsciber--any hope?
Moderator: Mark T Serbinski CA CPA
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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.
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.
"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.
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.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
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?
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?
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[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.
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.
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- Posts: 75
- Joined: Wed Apr 21, 2010 9:46 am
- Location: Winnipeg