Inheritance

usacanada1 · Post by **usacanada1** » Wed Oct 19, 2005 1:57 pm

There is no inheritance tax in Canada, correct? When my husband and I move to the U.S., and at some point receive inheritance from his parents in Canada, will we be taxed on that?

nelsona · Post by **nelsona** » Wed Oct 19, 2005 2:03 pm

Neither US nor canada have inheritance tax.

The US has estate tax, which taxes the estate. An estate entirely in canada would not be subject to US estate tax.

Canada has deemed disposition on death, which kicks in when they kick off. So any investments held at time of death are 'sold' and rebought, with tax possibly owing on the triggered capital gains, charged to the estate.

nelsona non grata... and non pro

Pamela · Post by **Pamela** » Wed Oct 19, 2005 4:41 pm

If your husband is an executor, than that will pose a problem if he is in the States and his parents estate is in Canada. Then trusts have to be used. It can be complicated, so be sure and consult a lawyer about this aspect.

nelsona · Post by **nelsona** » Thu Oct 20, 2005 10:06 am

While the caveat about a foreign executor is good, proposing trusts as the solution is not advisable.

First, the costs of setting up and maintaining such a trust for what seems like a 'normal' estate would FAR outstrip the cost of the correct solution, which would be to name a Canadian executor.

Second, it is never a good idea to have a family member -- not to mention a primary beneficiary -- as executor.

Third, in this particular case, as your huisband would be establishing a US presence, this would now subject him to immediate and burdensome IRS reporting because of his involvement in, and eventual benefit from, a foreign trust.

If his family has made him the executor, it is time to correct this, not set up a trust.

nelsona non grata... and non pro

Pamela · Post by **Pamela** » Thu Oct 20, 2005 7:55 pm

Nelson, I quite agree with you. My husband renounced his executorship of his relative's will, rather than go through the rigmarole of trusts, IRS reporting, etc.

Pamela · Post by **Pamela** » Thu Oct 20, 2005 10:17 pm

My advice was to consult a lawyer - so that an informed choice could be made.

usacanada1 · Post by **usacanada1** » Fri Oct 21, 2005 10:48 am

Thanks both of you.

usacanada1 · Post by **usacanada1** » Sat Oct 22, 2005 9:42 am

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by nelsona

While the caveat about a foreign executor is good, proposing trusts as the solution is not advisable.

First, the costs of setting up and maintaining such a trust for what seems like a 'normal' estate would FAR outstrip the cost of the correct solution, which would be to name a Canadian executor.

Second, it is never a good idea to have a family member -- not to mention a primary beneficiary -- as executor.

Third, in this particular case, as your huisband would be establishing a US presence, this would now subject him to immediate and burdensome IRS reporting because of his involvement in, and eventual benefit from, a foreign trust.

If his family has made him the executor, it is time to correct this, not set up a trust.

nelsona non grata... and non pro
<hr height="1" noshade id="quote"></blockquote id="quote">

I have one more question.

My husband is currently one of the executors, along with his brother. Are you saying all this extra IRS reporting would result from his being an executor, or his being a beneficiary? If he's not an executor, would there still be a large problem?

Thanks.

Pamela · Post by **Pamela** » Sat Oct 22, 2005 2:58 pm

There will be no problem of onerous IRS reporting or foreign trusts if your husband is only a beneficiary. He should either have his parents change the will, or if they pass away, then he can renounce his executorship in favour of his brother at the time.

nelsona · Post by **nelsona** » Sun Oct 23, 2005 10:03 pm

But once in US, until he renounces executorship, since he is also a beneficiary, he would be subject to reporting and fines for failure to report.

Like I said, lo these many days ago, forget the executorship (hos brother should find someone else too) in favour of a trusted (local) friend.

nelsona non grata... and non pro