Hi there,
I’m a former Canadian resident that lives in the US with a green card.
My mom is a Canadian resident and she just passed away. The only asset she has is a house and an RRSP, for which I was named the sole beneficiary.
The institution is saying that they will need to withhold 25% of the proceeds before I can receive the funds because I’m a non-resident. They say this will show up on a NR4 slip for 2017. Is this right?
I’m also the executor of my mom’s estate and will need to file a final tax return for her in Canada.
Everything I have read is that her RRSP was deemed to be disposed on death and must be reported on her final return and taxed. But if they withhold 25% and I include this on her return, won’t she be double taxed on this?
Ever see this before? Thanks, in advance.
Non-resident Beneficiary of Canadian resident RRSP
Moderator: Mark T Serbinski CA CPA
Since she has not designated a benefiary that is eligible for RRSP/RRIF transfer (her spouse or DEPENANT child) the RRSP is collapsed upon death, and tax is paid by the deceased. If the DECEASED was US resident, then the 25% withholding would apply.
In your mother's case, since she iwas a Cdn resident, SHE is subject to "normal" withholding on the collapse, and the income and tax withheld is reported on her final tax return.
That should only leave assets, the RRSP no longer exists, and you should receive money free of any tax.
I believe the institution is confusing how RRSP is taxed at death when the ANNUITANT was anon-ressint vs. when the BENEFICIARY is non-resident.
In your mother's case, since she iwas a Cdn resident, SHE is subject to "normal" withholding on the collapse, and the income and tax withheld is reported on her final tax return.
That should only leave assets, the RRSP no longer exists, and you should receive money free of any tax.
I believe the institution is confusing how RRSP is taxed at death when the ANNUITANT was anon-ressint vs. when the BENEFICIARY is non-resident.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
FYI for those reading this. it is NEVER a good idea for a US resident to be the executor of a foreign estate. You have now opened yourself up to unnecessary trust reporting.
Better to have a Cdn family member or trusted advisor be the executor.
Better to have a Cdn family member or trusted advisor be the executor.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Thanks so much!
I've been searching the internet for hours and there is not much info out there on this at all.
I did find this.
http://ca.rbcwealthmanagement.com/deleg ... 49/content
And this:
CRA notes in this TI that clearly amounts paid to a non-resident beneficiary of an RRSP must be subject to withholding tax pursuant to s. 212(1)(l) of the Tax Act, subject to possible relief under an applicable tax treaty. However, where s. 146(8.8) deems the annuitant to have received the proceeds from the RRSP immediately before death, that amount may be excluded from the amount taxable under Part XIII.
Sounds like you are right about this. Seems to me that only any growth after my mom dies would be subject to 25% non-resident tax not the entire amount.
In my reading I also came across something about a section 116 disposition requiring some sort of certificate if I was to sell my mom's house as a non-resident. Do you know anything about this?
I've been searching the internet for hours and there is not much info out there on this at all.
I did find this.
http://ca.rbcwealthmanagement.com/deleg ... 49/content
And this:
CRA notes in this TI that clearly amounts paid to a non-resident beneficiary of an RRSP must be subject to withholding tax pursuant to s. 212(1)(l) of the Tax Act, subject to possible relief under an applicable tax treaty. However, where s. 146(8.8) deems the annuitant to have received the proceeds from the RRSP immediately before death, that amount may be excluded from the amount taxable under Part XIII.
Sounds like you are right about this. Seems to me that only any growth after my mom dies would be subject to 25% non-resident tax not the entire amount.
In my reading I also came across something about a section 116 disposition requiring some sort of certificate if I was to sell my mom's house as a non-resident. Do you know anything about this?
You are correct that any RRSP growth after date of death would be distributed to you, with 25% tax withheld.
As executor, however, yopualso have the responsibility of seeing to it that the estae pays the tax on RRSP and any other income generated in the year of death, which might require you (the executor) recoving some of the RRSP funds you (the benefiairy) revcieved, if insufficient tax was withheld throughout the year.
As executor, however, yopualso have the responsibility of seeing to it that the estae pays the tax on RRSP and any other income generated in the year of death, which might require you (the executor) recoving some of the RRSP funds you (the benefiairy) revcieved, if insufficient tax was withheld throughout the year.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best