Life Insurance Payouts Bringing Canadian Money to US or US to

Dear Mr. Ingram:

Re the transfer of Canadian Money to the U.S.: I have a life insurance policy I bought when I lived in Canada in the early 80's.  I've been paying premiums on it ever since, even though my wife and I moved back to the States in the late 80's.  I am a U.S. citizen and my wife is dual.  When I pass on, the insurance pay-off will be sent to my wife through either a cheque (straight from the insurance Co) or a bank transfer which would be faster.  Will the sum be reported as it is substantially more than $10,000?  I assume there are no taxes in either countries on insurance pay-outs. Are there any other issues I need to address regarding this?

Thanks for your answers.  


Any cross border transaction of over $10,000 US or Canadian MUST / should be reported by someone.  In the case mentioned, the Life insurance company would report to FINCEN in Canada that they had sent the money across the border to your wife.  When she deposited the cheque in a US financial institutuin, that institution would report the 'over $10,000' deposit from a foreign source.

In the meantime, if the life insurance policy has a cash value of over $10,000 or it plus other acounts you and your wife might still have in Canada total over $10,000 US, you shoul dbe filling in forms TDF 90-22.1 (see the bottom two questions on schedule B of your 1040) Be advised that any US resident with foreign bank or other financial accounts is required to file schedule B and answer the two questions on the bottom).  If the life insurance policy is a term policy with no cash value, it does not count.

However, failure to file a required T DF 90-22.1 form has a minimum US penalty of $10,000 and a maximum penalty of  $500,000 plus five years in jail.


On Sep 17, 2007, at 12:22 AM, US / Canada Income Tax Help - CEN-TAPEDE wrote:
------------------------------------------ I just saw a question you answered about a Canadian living in the US as a permanent resident selling a home and wanting to transfer the money to a US bank. ( I'm in the same situation, except I want to keep most of the money in Canada. You said, below, that the banks will notify the treasury on amounts over $10,000. Is this $10,000 at any one time, or per calendar year?   What I want to do is bring enough money to pay off my US credit cards. Through several bank withdrawals and cheque deposits I've already put about $9600 Canadian into my US bank (not at the same time) to pay bills. Do I need to wait until next year to bring more in, or is it okay to continue doing this? I would need maybe another $11,000 to pay everything off here.   Thanks!       ------------------------------------------------------------------------------------
david ingram replies:

If you have transferred $9.600 so far and have paid it out already, there is no problem.  If you are transferring smaller amounts because you are trying to amass an amount over $10,000 for a single purpose, then you have to report the transfer of more than $10,000 AND the financial institution you have transferred the money to in the USA should be reporting the transaction as well.  In fact making several transfers for a total of $12,000 could make you look like a suspicous person whereas one $15,000 transfer would never raise a suspicious person report, especially if the money was then paid out to credit card companies.

The rules for reporting take place for both countries when there is a transfer (or series of transfers) of more than $10,000.

If you do it as a bank transfer, you do not need to worry.  The bank will do the reporting for you.

If you take cash out in Caanda and take it across the border yourself, YOU have to do the reporting to both countries.