Advice needed on inheritance in foreign currency

[itsmyparty]

After about 1-1/2 yrs, I am about to receive a substantial inheritance from a relative in Canada (I live in US, with dual citizenship). The law firm up there asked if I had a CDN bank acct to deposit it in (I don't) or should they send a check to me in CDN funds. Looking at the current exchange rate ..cdn $ worth about 20% less today...i am thinking of opening a bank account there and holding the $ at least for awhile to see if rate improves...as I do not need the $ at present. Downside I believe I have to open it in person..difficult but can do. Wondering if I could get some feedback or advice from the many of you who are in US but from abroad who have similiar situations of dealing with exchange rates. I think this might have more complications than I can think of! Any ideas will be most welcome! Thanks!


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[ArkTinkerer]

I think if you have a foreign bank account there are extra tax forms you have to file. Many banks will no longer create accounts for US citizens due to the paperwork required for them. At least that is what I've read. YMMV.

 

[Meadbh]

I suggest you talk with TD Bank. Locations - Find a TD Bank Near You

Based in Toronto, it provides cross border services and US accounts for Canadians, so hopefully the reverse will also apply at its US subsidiary.

TD Canada Trust - Cross Border Banking

 

[FIREd]

First, don't forget to declare your inheritance to the IRS. Second, if you open a bank account in Canada, there may be additional reporting requirements every time you file a tax return in the US.

As for dealing with exchange rates? If your goal to to eventually repatriate the funds to the US, then your are taking a gamble by leaving the money in Canada - exchange rates can go through pretty long cycles and you may be have to be patient to get the rate you want.

 

[pb4uski]

Declare inheritance to the IRS? Why? It's not income, its an inheritance.

 

[FIREd]

Declare inheritance to the IRS? Why? It's not income, its an inheritance.

Why? I imagine that the IRS wants to establish a cost basis in order to capture any future income derived from that inheritance, especially if those assets remain abroad.

Check form 3520. Part IV is probably the relevant section.

They are probably trying to make tax evasion a little harder. Same reason why we have to report foreign accounts.

 

[ksr]

As another alternative, you might want to check into ETrade's Global accounts. I've been able to hold funds in a foreign currency that way, and can exchange to US Dollars within that global account if/when I want to.

 

[Alan]

I think FIRE'd is correct, a foreign bequest of over $100k should be reported.

If it is deposited in a foreign bank account then you will also have to file an FBAR report to the Treasury, and depending on the sum, form 8938 with the IRS with your next tax return.

I believe all of the above forms are informational only, no taxes, but large penalties for failing to report.

 

[itsmyparty]

Thank you all for the good information....gives me things to check into. It is a risk ( exchange could go down more) to leave $ there as I think its the price of oil that may be affecting the difference in currency and so hard to predict what is happening with that.


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[Sunset]

I second the use of TD, but of course I would open the account in Canada, or better yet open a TD-Ameritrade account in Canada, and you can invest in stocks.

Its possible you could open the TD Ameritrade account in Canada online/phone/mail since they cannot really witness you sign documents anyhow.

The TD bank will not let you buy/sell mutual funds, but the TD brokerage does not seem to have the same restrictions. Besides mutual funds in Canada have very high MER rates.

 

[pb4uski]

Why? I imagine that the IRS wants to establish a cost basis in order to capture any future income derived from that inheritance, especially if those assets remain abroad.

Check form 3520. Part IV is probably the relevant section.

They are probably trying to make tax evasion a little harder. Same reason why we have to report foreign accounts.

Interesting. Learn something new every day. I guess it would come up when answering the questions at the bottom of Schedule B.

 

[itsmyparty]

Thanks again 'all' for taking time to reply. Did confirm that it is mandatory to report to IRS when receiving $100000 or more..even if held in another country. Also if/when receiving $10,000 or more...must either stop at US Customs to fill out Form 105 if physically bringing check or cash or if received by check in the mail or funds transfer...can fill one out and send it in. All for information only...no taxes involved.

After checking with Schwab ( with whom we do business- but they no longer operate in Canada)) and other US banks...found that only way to get any kind of CDN account is to physically go to Canada and open one...then several...like TD and Royal Bank offer cross border services...one even says something like put your $cdn here and exchange to US if rates improve...online so convenient. I also checked with B of A here...their charges are even more excessive for exchanging to US.

I should not complain as this is found $ ... But losing so much thru exchange is annoying! My DH feels its not really losing $ since we would not be spending the Canadian $ and get the equivalent spending power in US.

Also did some reading on where exchange rates might be going...but as you know predicting future doesn't usually work....but it appears the exchange rate will definitely not be improving for my purposes .. Mainly because the price of oil/gas not predicted to rise..which is affecting Canada's economy. Oh well!

So... Will fly to Canada to pick up check and open an account probably and go from there. Maybe check into Cd's or something. Its an expense to fly and stay there for a few days...but not the worst problem to have!

Still would love to hear any other ideas you might have!



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[Gumby]

You could hedge the currency. Take the money and convert to USD today, then go to Everbank and get one or more CDs denominated in Canadian Dollars. If and when the Canadian dollar rises to the level you want, cash in the CDs.

Here is a link. https://www.everbank.com/currencies/rates

 

[Clone]

// facetious mode: on

Maybe you could take the entire amount in prepaid debit cards. Apparently those are completely untraceable by the IRS ...

//facetious mode: off

 

[itsmyparty]

Will definitely look up Evergreen...thanks Gumby! Would never even thought of that!


Fun to think about gift cards, etc...now wouldnt than be fun...but wouldn't work! Out of the box thinking! (Lol!)


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