U.S. Inheritances – Taxable or Not?
When is the inheritance from your U.S. based parents taxable and in which country?
When you inherit property from a decendent, you generally inherit it at the fair market value on the date of death, which means that you only pay tax on the appreciation of the property after it is actually sold. A common statement made by many people is that inheritances are taxed in the U.S. but not in Canada and this is not entirely true.
Cynthia is a Canadian citizen and resident. Cynthia’s grandmother, who is a U.S. citizen and resident, is very ill and expected to pass away shortly. Cynthia is a named beneficiary of her grandmother’s estate but she is also a direct beneficiary of her grandmother’s IRA (Individual Retirement Account).
Cynthia’s mother, a dual citizen of Canada and the U.S., is the named beneficiary on Cynthia’s grandmother’s condo in Arizona; it has a current value of $235,000.
Will Cynthia be taxed on the receipt of her grandmother’s IRA? Can anything be done to change this and is this something that should be changed?
Will Cynthia’s mother be taxed on the receipt of the U.S. condo?
Will Cynthia’s grandmother’s estate be taxable if she died today?