Question on US treatment of Canada trust in estate

[BT]

My mother is a US citizen/Canadian resident (in B.C.). I am a US
citizen and resident, and will be her sole heir. Her tax attorney
suggests placing her house in a trust to avoid probate. I know this is
a common strategy in the states, but I don't know what the implications
are for either my mother's US return (she files in both countries) or my
eventual inheritance with a Canadian trust. (FYI, her total estate will
not approach the US estate tax threshold). Her tax attorney makes no
claims re: US taxes.

So, if someone here knows about this, does the trust sound like a good
plan in this case? Any red flags here? Any questions I should put to
her lawyer before he goes forward with this plan?

Thanks in advance.

[Alan Bowler]

Post by BT
My mother is a US citizen/Canadian resident (in B.C.). I am a US
citizen and resident, and will be her sole heir. Her tax attorney
suggests placing her house in a trust to avoid probate. I know this is
a common strategy in the states, but I don't know what the implications
are for either my mother's US return (she files in both countries) or my
eventual inheritance with a Canadian trust. (FYI, her total estate will
not approach the US estate tax threshold). Her tax attorney makes no
claims re: US taxes.
So, if someone here knows about this, does the trust sound like a good
plan in this case? Any red flags here? Any questions I should put to
her lawyer before he goes forward with this plan?

Probate fees can be considered a tax, but are not really
onerous. (1->2%)

Will the lawyer's fees for setting up the trust and other
recurring administration fees (costs of annual tax filings etc.)
exceed the proe costs?

[BT]

Post by Alan Bowler
Will the lawyer's fees for setting up the trust and other
recurring administration fees (costs of annual tax filings etc.)
exceed the proe costs?

It appears that the fee to establish the trust will be less than half of
the eventual probate costs--it's a fairly pricey house. The trust seems
like a good idea in those terms--what I am concerned about is how the US
views the Canadian trust. I would hate for this to either trigger an
immediate US capital gain for my mother, or somehow complicate my
eventual inheritance (and tax basis) of the house.

Thanks very much for your reply.

[Canuck57]

Post by Alan Bowler

Post by BT
My mother is a US citizen/Canadian resident (in B.C.). I am a US
citizen and resident, and will be her sole heir. Her tax attorney
suggests placing her house in a trust to avoid probate. I know this is
a common strategy in the states, but I don't know what the implications
are for either my mother's US return (she files in both countries) or my
eventual inheritance with a Canadian trust. (FYI, her total estate will
not approach the US estate tax threshold). Her tax attorney makes no
claims re: US taxes.
So, if someone here knows about this, does the trust sound like a good
plan in this case? Any red flags here? Any questions I should put to
her lawyer before he goes forward with this plan?

Probate fees can be considered a tax, but are not really
onerous. (1->2%)
Will the lawyer's fees for setting up the trust and other
recurring administration fees (costs of annual tax filings etc.)
exceed the proe costs?

Good reply.

But I might add in family dynamics. It is much easier for a legal mess
and spurned family to get a lawyer and screw things up when using a
standard will and probate courts. It is easier to dispute in a probate
court than with trust laws.

Trusts have the advantage of being harder to break from the original
intent. If in a trust, it was done while the person was alive, it
becomes much harder to mess with.

But costs, as you point out are a real determining factor. You are not
going to do the trust for a $200k estate, but for $22M and lots of
relatives, you sure would be advised to look at a trust as an option.