Question about inheritance tax between countries

January 8, 2024 9:27 AM

My father is a US citizen living in the USA. I'm a dual citizen of USA and Canada living in Canada. When I inherit money from him after he dies, is the tax situation different because I live in Canada?
posted by Joan Rivers of Babylon to Work & Money (3 answers total)

Unlikely. There is no inheritance tax in Canada. There's also no inheritance tax in the U.S., but there is an estate tax. However, any estate tax is paid by the decedent (your father), and as far as I can tell it doesn't matter where the beneficiary lives. (There might be some complications if you were not a U.S. citizen.)

You father's estate will not owe any federal estate tax unless he has more than $13.61 million. If he's in that situation, he should be consulting with an attorney.
posted by Mr.Know-it-some at 9:43 AM on January 8 [1 favorite]

Also, the state estate tax will vary from state to state. I'm in Oregon and just now closing my mother's estate after fifteen months of wrangling. She was cash poor, but because she and my father had owned two properties, her estate was valued at $2.1 million, which is over the $1 million Oregon threshold for estate tax. So, her estate owes 10% of that $1.1 million excess, or $110,000. Plus legal fees. Plus accounting fees. Plus funeral fees. And so on. Bottom line: The Oregon estate tax has sucked up all possible cash, etc., but we three children will inherit two properties free and clear (which is nice).

So, depending on where he lives and what he owns, his estate might owe taxes to the state.
posted by jdroth at 10:17 AM on January 8 [2 favorites]

As I understand it, to the extent inherited money (stocks or bonds included)are invested in a normal (non-ROTH) IRA account or 401k plan (these are tax-deferred retirement plans), you will have to pay ordinary US income tax on the money (on all of it - not just the gain). Depending on your tax situation, you can spread out the tax hit by leaving the assets in the account(s) and withdrawing a portion annually, but by rule you need to withdraw all of these tax-deferred funds within 10 years. My surviving parent structured their estate so that my sibling in a very low tax bracket will receive their inheritance from IRA funds. Depending on the amounts you looking at, it may make sense to talk to an accountant with US tax experience.
posted by gingerjules at 7:16 PM on January 8