What if I never filed Form 709 for gifts to my wife?
Where the receiving spouse is not a US citizen, the transfers you thought were invisible are reportable, and unreported years do not resolve themselves. The gift tax return reports gifts made during the year and records the use of lifetime exemption, so the missing years are missing entries in a running total somebody will eventually have to establish. The work is the same as it would have been, with reconstruction added: identify every movement of value between the two of you, year by year, and characterise it. Bank statements and property records are the source. Begin with the years for which records still exist.
Can I file Form 709 for gifts I made years ago?
Yes, and late returns are prepared for the years the gifts fell in rather than rolled into the current one. Each year stands on its own, which is why the first step is a chronology of transfers by year rather than a single total. Values are established as at the date of each gift, not today — straightforward for cash, more work for property or private company shares. Where the evidence for an early year has genuinely gone, say what was reconstructed and how, instead of presenting an estimate as a record. A filed year with disclosed limitations is a better position than an unfiled year.
Does a late Form 709 matter if no gift tax was due?
Exposure on this kind of filing is charged by reference to the form and the delay rather than to the tax, so a year in which exemption absorbed the gift is still an unfiled year. There is a second cost that matters more to families. The return is the record of how much lifetime exemption has been used, and where the returns were never filed there is no record — so the reconstruction lands on whoever administers the estate, working from bank statements decades afterwards. Filing late is how you stop that becoming someone else's problem.
Will unfiled gift returns come up when my estate is settled?
Usually, yes. An estate has to establish how much lifetime exemption the deceased had already used, and the filed returns are where that comes from. Where none exist, an executor is reconstructing a lifetime of transfers from bank records, property registers and family recollection, at the point when the donor can no longer explain any of it. Transfers to a non-citizen spouse are the hardest, because routine account restructuring between a married couple leaves much the same trace as everyday spending. Filing the missing years while you can still describe what each transfer was for is a service to whoever administers the estate.
How do I prove what an old gift was worth on Form 709?
By establishing the value as at the date of the gift, on evidence from that time. Cash is simple. Publicly traded shares can be established from market records for the day. Property needs a valuer instructed to opine as at the date of the transfer, rather than an appraisal of what it is worth now, and private company shares need the accounts and the shareholders' documents from that period. Keep the instructions you gave and the evidence you relied on. A late return draws more questions about how a figure was reached than a timely one, and a figure without its workings invites the whole year to be examined again.
Who files the missing gift returns if the donor has died?
The executor, as part of establishing what the estate has to show. It is uncomfortable work: the person who made the transfers cannot explain them, and the executor is characterising payments between family members from bank records alone. Two things make it manageable. Take the years in order rather than starting with the largest transfer, and write down the basis for each characterisation as you go, because the same transfer will be looked at again when the exemption position is totalled. Distinguish plainly between what the records prove and what the family believes, and keep the two apart in the file.
How do Canadians reduce US estate tax exposure?
The treaty does much of the work: it gives a Canadian resident a credit pro-rated by the share of the worldwide estate made up of US assets, plus a marital credit that can defer exposure on a transfer to a spouse. Beyond that the levers are the ones you would expect — the domicile of the funds you hold, whether US real property is held directly or through a structure, and life insurance to fund the liability rather than reduce it. Worldwide estate value is what the pro-ration turns on. See treaty relief on US estate tax.
What does "received a distribution from a foreign trust" mean on my return?
It is asking whether the trust conferred anything on you during the year — cash, property, or the use of trust property, including rent-free occupation of a house and, in some circumstances, a loan. Answering yes brings an information return, and where the distribution includes income accumulated in earlier years the tax computation can carry an interest charge for the delay. Trust accounts showing the composition of the distribution are what keep that computation from defaulting against you. See Form 3520.
