inheritance transfer from to the USA


My Grandparents recently passed away here in the United States, where they had been living since moving from Canada in 1956. Their estate includes some money (45,00 canadian)which was left in Canada that the executrix (their daughter)is trying to retrieve. Will there be a tax on this money if it is transferred into an account in the states. If so is there a way to distribute this money to the heirs (all living in U.S.) and avoiding a tax. Thank you.

david ingram replies:

There is absolutely no Federal or Provincial estate or inheritance tax in Canada.  There ARE fees which need to be paid and which have different exemption amounts and different rates in different provinces.  In BC, for instance, $45,000 would require a payment of 20 times $6.00 or  $120.00 for a $45,000 estate as follows:

(3)  If the value of the estate exceeds $25 000, whether disclosed to the court before or after the issue of the grant or before or after the resealing, as the case may be, the amount of fee payable is

(a) $6 for every $1 000 or part of $1 000 by which the value of the estate exceeds $25 000 but is not more than $50 000, plus

(b) $14 for every $1 000 or part of $1 000 by which the value of the estate exceeds $50 000.

(4)  If, after the issue of any grant or after any resealing, the personal representative learns of the existence of an asset of the deceased that was not disclosed in the Statement of Assets, Liabilities and Distribution exhibited to the affidavit leading to the grant or to the resealing, determines that the value attributed to an asset in that statement must be revised or determines that an asset was otherwise not properly disclosed, the personal representative must disclose to the court the existence and value of that asset and must pay to the government the difference between the fee paid before the issue of the grant or before the resealing and any greater fee that would have been payable under subsections (1) to (3) had the asset been disclosed or appropriately valued in the original Statement of Assets, Liabilities and Distribution.

There would also be filing fees as well.

'IF' the estate is in Manitoba or BC, Lawyer David Stoller at (604) 922-4702 has handled many of these cross border estatres for us. I would make a bet that paying a fee for the professional service will likely save your sister a 'lot' of trouble and be worth it.

There could be another problem though.  If, as is quite likely, your grandparents were doing as many do and did not report the edxistence of the Candian account on the bottom of schedule B of the 1040 or pay tax to the US and Canada on any interest earned over the years, now is the time when that comes to the authorities attention.  What happens, is they get the T5 slip sent to a brother's or sisters in Caanda and do not pay tax here because it is too small and then do not report in on the US return as well.  they consider the Canadian interest to be their canadian vacation money and only spend it in Canada.

Augustus Bosa, a well known Vancouverite received a criminal conviction for doing the same thing in reverse in Vanocuver with accounts in the US and Italy.  He used the money in those accounts (which also included some undeclared income) for his US and Italian vacations.

In your grandparents' situation as described, the financial institution in Canada should have been remitting 10% taxon any earnings to the CRA every year and your grandparents should have been reporting the interest on their schedule B and answering YES to the foreign account question, second to the bottom on schedule B. they would then have received credit on a dollar for dollar basis for the Canadian Tax paid by claiming it as a foreign tax credit on pasive income on US tax Form 1116.

Then they would have had to fill in Schedule TDF 90-22.1 to report the existence of the foreign account to the Departmet of the Treasury.  The minimum penalty for failure to report is now $10,000 with a maximum of $500,000 PLUS up to 5 years in jail.

Step carefully here with regard to the account.