OttawaBound

Hi,

I am a Canadian resident and expect to become a dual citizen in the near future. I have a UK pension that I have no need to access. Were I a UK resident, I could leave it in my will to my kids (they are UK resident). If you are not familiar with this process, the recipients receive the pension 'as-is'. They can draw on it at any time and they pay tax and their then current marginal rate. So the received pension is still tax advantaged, but there are no restriction on how it is drawn.

I know that if I had an RRSP then it would get dissolved on my death and taxed as income in the year of death. But this is a UK pension. So is it different? Can I, for example, write a UK will and pass on these assets and therefore keep them outside of Canada for ever?

I have googled this endlessly, and am no closer to getting an answer. Any suggestions would be greatly appreciated.

Thanks.

Pulaski

There are endless disagreements on BE, and further afield, as to whether someone with assets in two countries [1] "needs" two wills, or [2] if one will is not only all that is required, but two can cause problems. Both camps can cite numerous experts and professional advice, but I am firmly in the "one will camp". A will, written in English, is your "last will and testament', and there can only be one "last" will, so by having two wills you open up a can of worms (if two wills have different beneficiaries) becuase the beneficiary(ies) under the later will can challenge the validity of any preceding earlier will.

Siouxie

It's not necessarily taxed in your year of death... see https://www.taxtips.ca/filing/pensio...ibleincome.htm
Don't know if this is of use.. https://www.canada.ca/en/revenue-age...gn-income.html

I presume that if you don't bring your pension to Canada and it remains in the UK and you leave it in your UK will that there wouldn't be a 'claw back' here.. but you might need professional advice on that one. I'd also double check on making a will that is valid in both countries and whether you need a will from Canada 'reprobated' in the UK, in effect. (I think there's a thread on it somewhere on BE if you do a search).

Revin Kevin

In the UK you can take 25% of your whole pension fund tax as a tax free lump sum. Am I right in thinking that this would not be the case if you were tax resident in Canada at the time?

Hurlabrick

Yes, correct. If anyone is age 55 or older in the UK, they may be wise to take the tax free lump sum BEFORE settling in Canada for good.

Have a read of the wiki here:

https://britishexpats.com/wiki/Trans..._Free_Lump_Sum

Revin Kevin

Thanks that's as I thought. Is it just a case of staying out of Canada / in the UK for more than 6 months in a given year to change tax status? I'm thinking of someone who has a substantial pension pot but who will be living in Canada for a few years before their 55th birthday.
Could they return to the UK for say 6 months and a day to draw their tax free sum or is it not as simple as that?

Siouxie

It would depend somewhat on whether they were resident for tax purposes in Canada during that year... having 'significant ties - such as a house, spouse, family, bank accounts etc., - can complicate your tax status when out of the country.. and if you intended to move back within 6 months that could complicate matters further as you may not be deemed to have 'established ties in another country' and would therefore be liable for Canada taxes on the income you have received..
https://www.canada.ca/en/revenue-age...ce-status.html
https://www.canada.ca/en/revenue-age...cy-status.html
For example..