From: Pittsburgh, PA
Dear TaxMama,
What are the IRA distribution rules for a traditional IRA to non-American
citizens?
The US domiciled parent passed away this year and has three children who
are South African citizens and live in South Africa.
I would like to know what tax implications the children will have and what
options they have.
Thanks.
Nolan
Hi Nolan
They'll have pretty much the same treatment as US persons, when it comes
to the distributions.
They'll have to pay taxes on the money. Since their parent never paid taxes
on the money deposited into the IRA, or the earnings, someone must.
There won't be any penalties for early withdrawal, since the distributions
will be due to the death of the owner of the account.
However, since they are not US citizens or residents, I don't believe they
would have the option of rolling over the account to their own IRAs. They'll
have to take it all at once, when the estate settles and releases the funds.
Someone will have to arrange to file Form 1040NR (non-resident tax returns)
for them.
I don't know if they have any options. But if they are interested in hiring
an expert in the field of expatriate and non-resident alien taxation, there
is someone I can recommend. And his fees are quite reasonable.
Best wishes,
Eva Rosenberg, MBA, EA
