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Discussion Starter #1
I know that in most provinces, estate/probate fees can be evaded if you have a joint account with right of survivorship any one to sign. But can I use a joint account located at a Canadian brokerage to hold large amounts of US stocks (think above US$5, 500, 000) and have the assets pass directly to the other account holders upon the death of one account holder so as to evade the IRS dragnet? For context, all persons are residents of Canada for income tax purposes and none have US citizenship or Green Cards, nor have they ever been in the US for more than 183 days in a year.
 

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SunLife's PDF as well as another link listed below seem to be saying no.

SunLife says:
An important feature of the [US] estate tax for Canadians is that US situs assets owned jointly with right of survivorship are included in the estate at full value when the deceased joint owner isn't a US citizen.
(I added the "[US]" part to make it clear the article is about US taxes.)


The other link says:
Non-U.S. Citizen Spouse Estate Tax: If the surviving spouse is not a U.S. citizen, the unlimited marital deduction enjoyed by U.S. citizen married couples is not available ...
http://ingenuitycounsel.com/2013/01/us_estate_tax_issues_for_canadians/

Though it does say there is a small exemption that might be available and that there may be other structures that might work (ex. Qualified Domestic Trust).


It would seem that the simple solution that works for Canada does not work for the US taxes.


Cheers
 

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OK, but what would the consequence be if I don't pay? I could just sell everything when the person dies and transfer the money to my own account, right? Or will a US court be able to force a Canadian financial institution to garnish my Canadian bank account?
 

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I suggest that if you are indeed talking about $5.5MM US, you should be getting some expert cross-border lawyering advice.

And (flippantly), I don't mind you screwing the IRS but don't mess around with the CRA - Canada is heading towards needing all the tax revenue we can get. :uncomfortableness:
 

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OK, but what would the consequence be if I don't pay? I could just sell everything when the person dies and transfer the money to my own account, right? Or will a US court be able to force a Canadian financial institution to garnish my Canadian bank account?
There are some planning techniques you can implement like holding the US securities in a Canadian corporation or getting your US exposure through a Canadian ETF that holds US securities. And I'll echo OnlyMyOpinon's comment that for an estate of that size it would be worth it to work with a accountant and/or lawyer to plan for this.
 

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There are some planning techniques you can implement like holding the US securities in a Canadian corporation or getting your US exposure through a Canadian ETF that holds US securities. And I'll echo OnlyMyOpinon's comment that for an estate of that size it would be worth it to work with a accountant and/or lawyer to plan for this.
Ahh...here's the idea. I dug up some documents saying that a US court has no authority to force you to pay IRS taxes or fines by means of seizing Canadian assets--especially if the deceased person is a Canadian citizen. So, in theory, since a joint account can be accessed by every joint holder online, the stocks could just be sold on or before the date of death of the individual (or the first trading day after the death of the individual if death occurred on a holiday). The remaining joint holders could then just go to the brokerage, present the death certificate at the branch and remove the deceased's name from the account. How is the US to know that this person died? The person wasn't born in the US, never had US citizenship or a Green Card, nor an SSN.

Another thing, unless your US estate exceeds $5, 500, 000, can you not just deliberately underreport your assets to the taxman? How would the US get banking information of non-US persons? Falsifying a tax return is illegal, but the worst thing that could happen to the person making false statements is a denial of entry to the United States for life, correct? No non-resident alien would have to pay a fine or go to jail for lying on an IRS form?
 

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Given the amount of money involved, it might be worth getting some professional advice on how to prevent US tax problems before they occur.

In general, though, you are correct that the US has no power to enforce penalties or fines, or collect taxes owing, from Canadian citizens in Canada. However, if those US stocks are a US asset and the IRS knows about them, they might have leverage. (I know nothing about what sort of filing and reporting requirements might exist for Canadian citizens and residents owning a substantial amount of US stock.)
 

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... Falsifying a tax return is illegal, but the worst thing that could happen to the person making false statements is a denial of entry to the United States for life, correct?
Interesting idea ... somehow the IRS finds out, a bulletin then gets sent around to US customs yet the action is to refuse entry?

With money owing, wouldn't the bulletin more likely be "detain for the IRS interview"? As I understand it, US customs for entry is US soil so there's nothing preventing a detention.

Some articles seem to be contradicting the idea that the worst case is being turned away.
https://www.nestmann.com/why-the-irs-can-now-ground-you
http://www.journalofaccountancy.com/issues/2012/aug/20125795.html


Cheers
 
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