I am planning on reviewing the current setup of my will, trust and beneficiaries. My assets are divided into the following:
1) 403b accounts
2) Roth IRA accounts
3) taxable accounts
4) condo
5) life insurance policy
The total value is small so there will be no federal estate tax.
I have two heirs
1) Sibling 1, who is American
2) Niece (the daughter of sibling 2), who is Canadian.
I have a revocable trust with my two heirs as contingent trustees. The idea is for the trust to distribute the assets and then dissolve itself.
Currently I have the following setup.
1) 403b: Two heirs as beneficiaries.
2) Roth: Two heirs as beneficiaries.
3) Taxable: POD/TOD to two heirs directly or to revocable trust.
4) condo is in the revocable trust.
5) Life insurance policy: Revocable trust is the beneficiary.
6) A very small RRSP: Two heirs as beneficiaries
Here are my questions questions.
1) 403b: If my niece is an American, then she needs to take the money out within 10 years due to the new law. My understanding is that being a non-American still allows her to stretch out the withdrawal over 10 years. My understanding is that for non-American, there will be a 30% tax on withdrawal from 403b, but due to tax treaty with Canada, this is reduced to 15%. Is my understanding correct? Does this count as income in Canada? If it does, then my understanding is that she can claim the 15% tax she paid in the US as a foreign credit in Canada. Is my understanding correct?
2) Roth: My understanding is that being a non-American still allows her to stretch out the withdrawal over 10 years. Due to tax treaty between the two countries, this is not taxable in the US and Canada.
3) Taxable: Is there any difference for my niece to inherit the money as a beneficiary using POD or through the trust in terms of step-up basis?
4) Condo: This is in my trust. Is there an issue with the step-up basis?
5) RRSP: Any issue with my brother (American) inheriting this?
I do plan to talk to the lawyer who drew up the revocable trust but I thought I will ask these questions here first. Thank you for your help.
Inheritance questions
Moderator: Mark T Serbinski CA CPA