[WSBAPT] Mandatory withholding on tax deferred account paid to noncitizens

[John Creahan]

As Katherine points out, nonresident aliens generally have to file a Form W-8BEN, and are subject to 30% withholding. Treaty issues can certainly complicate things, particularly with regard to IRA distributions.
Depending on the account size, you may want to have the IRA divided into accounts for each beneficiary. The responsibility for distributing the asset (as well as the withholding and paperwork) would fall to the financial institution. Not all financial institutions will agree to do this, but Natalie Choate strongly believes that it is permissible. She discusses it on her website at http://www.ataxplan.com/bulletinboard/ira_providers.cfm.
Have a good weekend,
John

John Creahan
206-621-5848
www.cairn-law.com<http://www.cairn-law.com/>


From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Katharine P. Bauer
Sent: Friday, February 27, 2015 2:24 PM
To: WSBA Probate & Trust Listserv
Subject: Re: [WSBAPT] Mandatory withholding on tax deferred account paid to noncitizens

There are some issues pertaining to the need of a PR to withhold taxes owed to the government from out of country beneficiaries.  Just what to withhold depends on the treaty or protocol between our country and their country of residence.  It is far easier to compute all taxes (income, capital gains etc) and then deliver the balance to the appropriate legatees.  I had a 3 million dollar estate, with over 100 beneficiaries, half of whom were in Canada.  The tax owed in our situation was less than $1500 and it was easier (cheaper for the estate) to pay the tax than to compute each individual's share and withhold those amounts....run the numbers to see where you stand.

On Fri, Feb 27, 2015 at 2:10 PM, Sherry Bosse Lueders <sherry at sherryluederslaw.com<mailto:sherry at sherryluederslaw.com>> wrote:
A similar question to one posed yesterday, but with a slight twist in facts: Decedent has a tax-deferred account paid to the Estate, but several of the Estate’s beneficiaries live outside the U.S. and are not U.S. citizens. When dealing with beneficiaries who would not otherwise owe US income tax, should the estate still distribute the full amount and instruct the beneficiaries to consult with an accountant regarding taxes owed on the distribution? The countries involved are the Czech Republic and Japan – does anyone have specific experience with making distributions in those countries?

Sherry Bosse Lueders | Of Counsel

Stacey L. Romberg, Attorney at Law
Telephone:  (206) 784-5305<tel:%28206%29%20784-5305>
Fax:  (206) 789-8103<tel:%28206%29%20789-8103>

Visit our website at http://staceyromberg.com/.

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Katharine P. Bauer
Bauer Pitman Lifetime Legal, PLLC
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