Non-US citizen, non-resident IRA beneficiaries
I’m reposting this because I posted it originally over the weekend, and I’m guessing no one saw it.
I have an IRA, a Roth IRA, and an inherited IRA, and two of the beneficiaries are non-US, non-resident citizens (they are citizens of Sweden). They will also inherit non-IRA money.
What are the issues regarding their inheritance? Do I have to do something special in my will, or can I just list them and the executor will ensure that the appropriate US taxes are taken before the remainder is sent to them in Sweden?
Thanks!
Permalink Submitted by Alan - IRA critic on Tue, 2024-08-06 11:36
With respect to your IRAs, they will pass directly to the designated beneficiaries, so your will and your executor will not affect this process. As for the details regarding foreign beneficiaries, I cannot provide much help other than to state that the Sweden/US tax treaty does contain provisions that prevent double taxation of foreign income. Typically, the custodian will have a mandatory withholding of 30% for the distribution, so the beneficiaries would have to file a US Return in order to recover or get credit for the withholding. If the Roth is qualified, there should be no withholding for that account.
The RMD for the beneficiaries is not affected by their foreign status. Assuming that they are 10 year rule beneficiaries, for the Roth they will not have to take any distributions until the total distribution in year 10, for the TIRA if you pass after your RBD there will be annual RMDs required each year until year 10, and for the already inherited IRA, the beneficiaries will have to continue your annual RMD schedule and also drain it in year 10 if there is still a balance. If the balances are small enough, in order to avoid dealing with these tax treaties every year, they may want to take a total distribution rather than stretch the non Roth accounts over 10 years.