Foreign Citizen as IRA Primary Beneficiary
A United States citizen would like to name a Portuguese citizen as the primary beneficiary of their Traditional IRA. The current owner is taking their annual RMDs, however the Portuguese citizen is still 20 years away from their mandatory distribution age. If the Portuguese beneficiary inherits the IRA today – 1. would they be subject to the 10 year distribution? 2- if they move the IRA to Portugal, would they be subject to US income tax on the distributions? 3- Would they be subject to Portuguese income tax?
Thank you,
Jay
Permalink Submitted by Alan - IRA critic on Thu, 2025-02-13 17:19
They would be subject to the same RMD rules as a domestic beneficiary, could be an EDB or a 10 year rule beneficiary with annual RMDs because the owner passed after RBD.
However, there is likely a mandatory 30% fed withholding for distributions to a foreign beneficiary, for which they would have to file a tax return to claim any refund. There won’t likely be double taxation but the details will vary based on the US-Port tax treaty.
Distributions in excess of the RMD will not be eligible for rollover to any Portuguese plan. The plan cannot be moved to Portugal, just the distributions from the plan.