Please forgive me not researching further - little baby not giving me much time.
I and my two kids are US citizens - kids are dual and I will soon be dual. Hubby Can. for what it's worth
We moved here (back here for hubby) 2006 and have maxed out RRSPs and when kids arrived, RESPs (and TFSAs)
**Question - What am I reading about RESPs being taxable and not worth it? My accountant specializes in Canadian and US returns but hasn't said anything about the RESP - and I think last year I didn't even get a form for the then solo RESP but can't remember what form it is (T3?? 5??) that I got the year before for the RESP.**
Thank you!!!!!
RESPs and US taxes
Moderator: Mark T Serbinski CA CPA
RESPs are not recognized by IRS as a tax shelter. So, you need to report any internally generated income on them yearly to IRS. Hopefully you have enough other Cdn income (and thus tax) to offset any US tax).
ADDITIONALLY< the owner of the RESP (the parent or grandparent) needs to file a 3520 if they are a US 1040-filer. This has reecently expanded to the spouse of a 1040_filer even.
The solution id for the Cdn grandparents of the child to hold the RESP.
ADDITIONALLY< the owner of the RESP (the parent or grandparent) needs to file a 3520 if they are a US 1040-filer. This has reecently expanded to the spouse of a 1040_filer even.
The solution id for the Cdn grandparents of the child to hold the RESP.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
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Diskdoctor
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Someone else posted a link that seemed to indicate that congress was or had enacted regs that prevented the spousal end-around of trust reporting.
Shouldn't much matter, since most US filers usually file joint.
Shouldn't much matter, since most US filers usually file joint.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
My situation is almost identical to the original poster. I'm a dual citizen, kids are Canadian-born but have not yet been registered as U.S. citizens. My husband is Canadian citizen. We live in Canada.
I'm puzzled about your "solution" to have a grandparent take out the RESP for the kids. If the kids are U.S. citizens (as in the case of the original poster), don't the *kids* then run afoul of the IRS as beneficiaries of the RESP? I have wondered whether one could get around the restrictions by not registering the kids as U.S. citizens until after collapsing the RESP, but since they must be registered before 18th birthday, that does not seem to be a solution... unless they're geniuses and complete college by 18!
I read on another site that the cost of preparing the 3520's makes the RESP not even worth it. But it said nothing about the grandparent option.
I'm puzzled about your "solution" to have a grandparent take out the RESP for the kids. If the kids are U.S. citizens (as in the case of the original poster), don't the *kids* then run afoul of the IRS as beneficiaries of the RESP? I have wondered whether one could get around the restrictions by not registering the kids as U.S. citizens until after collapsing the RESP, but since they must be registered before 18th birthday, that does not seem to be a solution... unless they're geniuses and complete college by 18!
I read on another site that the cost of preparing the 3520's makes the RESP not even worth it. But it said nothing about the grandparent option.
The grandparent option works best for Cdn-only kids (ie. those who have kids and then move to US).
Your children are US citizens. Period.
Technically they will only be beneficiaries of the RESP when they get the money.
It's not the cost of 3520 that makes them untractive. Its that they are not tax sheltered. You might as well open a normal investment account in their name.
Your children are US citizens. Period.
Technically they will only be beneficiaries of the RESP when they get the money.
It's not the cost of 3520 that makes them untractive. Its that they are not tax sheltered. You might as well open a normal investment account in their name.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
The recent HIRE act redefines the beneficiary reporting requirements. Anyone who has an RESP and US citizen children should become familiar with that act.
nelsona wrote: "Your children are US citizens. Period."
As an aside, I find it interesting that a parent CAN acquire US citizenship for minor children while living abroad, but that same parent CANNOT relinquish that citizenship (see below). The grounds are based on a lack of understanding of renunciation, but the corollary would also hold: lack of understanding of acquisition of citizenship.
Because a parent can only acquire citizenship, a child who inherits or receives a foreign trust could be taxed under US law with other recourse. Neither child nor parent have the right to give up the child's citizenship; therefore, the child can be held accountable to the whims of the IRS. I have to wonder if this could not be challenged in US courts, because the child is denied the right to renounce. Again, just an aside, but something I find interesting.
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F. RENUNCIATION FOR MINOR CHILDREN
Parents cannot renounce U.S. citizenship on behalf of their minor children. Before an oath of renunciation will be administered under Section 349(a)(5) of the INA, a person under the age of eighteen must convince a U.S. diplomatic or consular officer that he/she fully understands the nature and consequences of the oath of renunciation, is not subject to duress or undue influence, and is voluntarily seeking to renounce his/her U.S. citizenship.
nelsona wrote: "Your children are US citizens. Period."
As an aside, I find it interesting that a parent CAN acquire US citizenship for minor children while living abroad, but that same parent CANNOT relinquish that citizenship (see below). The grounds are based on a lack of understanding of renunciation, but the corollary would also hold: lack of understanding of acquisition of citizenship.
Because a parent can only acquire citizenship, a child who inherits or receives a foreign trust could be taxed under US law with other recourse. Neither child nor parent have the right to give up the child's citizenship; therefore, the child can be held accountable to the whims of the IRS. I have to wonder if this could not be challenged in US courts, because the child is denied the right to renounce. Again, just an aside, but something I find interesting.
-----------------------------------------------------------
F. RENUNCIATION FOR MINOR CHILDREN
Parents cannot renounce U.S. citizenship on behalf of their minor children. Before an oath of renunciation will be administered under Section 349(a)(5) of the INA, a person under the age of eighteen must convince a U.S. diplomatic or consular officer that he/she fully understands the nature and consequences of the oath of renunciation, is not subject to duress or undue influence, and is voluntarily seeking to renounce his/her U.S. citizenship.
Since we live in Canada, and since I (U.S. citizen) file as an individual (my Cdn husband is not a U.S. tax person), then couldn't my husband take out the RESP for my U.S. kids? I'd think he should never have to declare taxable growth to IRS, and when the kids take out the funds, then maybe they would have to declare the growth at that time (or maybe not).
I understand that, for a U.S. citizen parent, taking out an RESP has no advantage over opening a normal investment account in the kid's name, since they are not tax-sheltered funds. But RESP funds can trigger CESG grant money to Cdn residents from the Cdn gov't that is not insignificant. If it weren't for the grant money I'd be leaving on the table, I wouldn't give it another thought.
I understand that, for a U.S. citizen parent, taking out an RESP has no advantage over opening a normal investment account in the kid's name, since they are not tax-sheltered funds. But RESP funds can trigger CESG grant money to Cdn residents from the Cdn gov't that is not insignificant. If it weren't for the grant money I'd be leaving on the table, I wouldn't give it another thought.
Obviously I don't understand the citizenship stuff.
My understanding was that a U.S. citizen living abroad who wants to register his/her foreign-born child as a U.S. citizen only has until the kid's 18th birthday to do so. That seems to imply that until they are registered, they are *not* U.S. citizens. Otherwise, how could the U.S. gov't say that after 18, the opportunity is lost?
My understanding was that a U.S. citizen living abroad who wants to register his/her foreign-born child as a U.S. citizen only has until the kid's 18th birthday to do so. That seems to imply that until they are registered, they are *not* U.S. citizens. Otherwise, how could the U.S. gov't say that after 18, the opportunity is lost?
This is incorrect.
The US citizenship of the child is based wholly on the citizenship and residence of his parent(s) PRIOR to its birth. If the child has automatically acquired citizenship, he cannot "lose" iy by some failure to act.
The registration you speak of is simply one of the methods of obtaining "prrof" of US citizenship; the other is by simply applying for a US passport.
But this is only proof, US citizenship has already been conferred at birth.
The US citizenship of the child is based wholly on the citizenship and residence of his parent(s) PRIOR to its birth. If the child has automatically acquired citizenship, he cannot "lose" iy by some failure to act.
The registration you speak of is simply one of the methods of obtaining "prrof" of US citizenship; the other is by simply applying for a US passport.
But this is only proof, US citizenship has already been conferred at birth.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
I'm curious about this.
If spouse is not a US Citizen and not a resident of US, and is sole owner and funder of the RESP, how can IRS demand he/she file a 3520?
This would seem to imply a 3520 would need to be filed for any instrument owned by non-US spouse that the IRS might consider a trust? An RRSP?
The child benificiary may be a US citizen, but I would think when spouse collapses RESP to pay for education, it would just be as if he/she had written the child a cheque since child has no tax responsibility for the RESP.
If spouse is not a US Citizen and not a resident of US, and is sole owner and funder of the RESP, how can IRS demand he/she file a 3520?
This would seem to imply a 3520 would need to be filed for any instrument owned by non-US spouse that the IRS might consider a trust? An RRSP?
The child benificiary may be a US citizen, but I would think when spouse collapses RESP to pay for education, it would just be as if he/she had written the child a cheque since child has no tax responsibility for the RESP.