Join the presentesr, Brian Wruk and Terry Ritchie and other participants following Wednesday's Live Virtual Seminar (10/12, 3:30 PM ET) as they share thoughts about the presentation.

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I have a client, US Citizen, who was living in Canada and married to a Canadian who died a while ago.  When he died, she moved back to Michigan.  She inherited approximately $150,000 in his RRSP which is now worth approximately $750,000.  It is still in Canada.  She would like to move it into the US, but is worried about the tax consequences.  She is 51 and in the 31% tax bracket in the US.  What are the tax consequences, both Canadian and US, if she moves it here?  Can she continue tax deferral here in the US?  Does she get a step-up in basis?  Based on what?  Are there other considerations I am unaware of?  Thanks!!!!

Brian and Terry, on behalf of FPA, I'd like to thank toy for your time today.

 We got one last question after the call ended, from AmyAbromaitis. She writes:

Because the trustees reside in Canada, the trust situs would also be in Canada. This would subject the entire trust to Canadian trust tax rates and a T-3 trust tax return would have to be filed annually in Canada.

Canadian tax consequences - lump-sum withdrawals would be subject to a 25% withholding by Canada Revenue Agency, periodic payments are subject to a 15% withholding

US tax consequences - she can continue to continue the tax-deferral at the federal level if she has filled out and continues to fill out Form 8891 annually. If she decides to withdraw the funds, the taxable portion in the US is indeterminable based on the information provided. She does not get an automatic step-up in basis in moving to the US.

Other considerations - It sounds like there are many but it is difficult to comment without a greater understanding of the client's unique situation. We can say that we have been successful with our clients in withdrawing RRSPs from Canada, paying the required withholding to CRA and recouping some, and in some cases all, of the withholding on their US return through proper foreign tax credit planning. This requires developing a withdrawal strategy, coordinating that with the tax preparation and ultimately investing the portfolio appropriately to recoup any foreign tax credits carried over. Further, that seems to be an awful lot of money and we are not sure who is managing it in context with the US portfolio in a coordinated fashion. With the Canadian exchange rate above parity right now and your client's need for US$ to meet their future retirement expenses, it may be a really good time to move those assets to the US.

Our book The Canadian in America - Real-life Tax and Financial Insights Into Moving and Living in the US available through our website at www.transitionfinancial.com will give you some further insights into the issues this client faces. In our experience, folks with an RRSP remaining in Canada while residing in the US adds a multiple of 5 to the complexity of their situation. It is unfortunate but it is due to the compliance requirements of the IRS and CRA.

If both trustees, whether co-trustees or not, reside in Canada, the trust situs is in Canada.