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Question

Hi Phil,

I came across one of your articles and your email. I am wondering if you would be willing to consult on what I think might be, to you, a fairly straightforward question regarding withholding rates on distributions from a US estate and Canadian beneficiaries.  I am happy to compensate any consulting fee.

Thanks for your time in reviewing this email : ).

XXXXX

Answer

Thanks for the email. Unfortunately, I’m only able to advise current investment clients of Beacon.

That being said, let me give you some general thoughts. From a Canadian perspective, you’ll want to ensure that capital paid to the beneficiaries is at least one year removed from when the trust realized any capital gains. If not, they may face double tax issues. Trust corpus is only available to the beneficiaries in the next calendar period after the gains are realized. The trustee will be able to elect to pay out trust corpus tax-free to the beneficiaries.

You’ll also want to ensure that the Canadian beneficiaries file T1142 for distributions from the estate.

Any income distributions in the form of dividends or other income will likely attract a 15% tax to the Canadian beneficiaries. Also, you’ll want to ensure cost basis are properly tracked for any investments distributed in-kind.

Cross-border estate issues can be tricky, so you’ll want to get proper advice on the matter.

Hope that helps, and if your Canadian clients need help in managing their investments, they can book with our team here to review their situation.

Hope that helps.

Cheers

Phil