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Beneficiaries living in Mexico

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Oilcan

New member
I have a Mexican friend that has lived in Arizona for over forty years. He is retired from working for the state for 30 years and has a tax deferred retirement plan (I think 403-(b)). He wants his sister who lives in Mexico to be the beneficiary to the plan but he has been told by the administrator of the plan that the beneficiary needs to have a social security number. Of course Mexican citizens don't have SS numbers. What is he to do?
 


Ohiogal

Queen Bee
I have a Mexican friend that has lived in Arizona for over forty years. He is retired from working for the state for 30 years and has a tax deferred retirement plan (I think 403-(b)). He wants his sister who lives in Mexico to be the beneficiary to the plan but he has been told by the administrator of the plan that the beneficiary needs to have a social security number. Of course Mexican citizens don't have SS numbers. What is he to do?
Basically write a will and state that she is the beneficiary. And check with an attorney who does employment law that issue.
 

Taxing Matters

Overtaxed Member
I have a Mexican friend that has lived in Arizona for over forty years. He is retired from working for the state for 30 years and has a tax deferred retirement plan (I think 403-(b)). He wants his sister who lives in Mexico to be the beneficiary to the plan but he has been told by the administrator of the plan that the beneficiary needs to have a social security number. Of course Mexican citizens don't have SS numbers. What is he to do?
As Jack said, what she needs is an ITIN from the IRS. He can provide that ITIN to the plan administrator when he make her his pay on death (POD) beneficiary. The plan administrator needs that ITIN for tax withholding and reporting purposes. See the IRS page on plan distributions to foreign persons for more on how the withholding will work on the plan distributions.
 

LdiJ

Senior Member
I have a Mexican friend that has lived in Arizona for over forty years. He is retired from working for the state for 30 years and has a tax deferred retirement plan (I think 403-(b)). He wants his sister who lives in Mexico to be the beneficiary to the plan but he has been told by the administrator of the plan that the beneficiary needs to have a social security number. Of course Mexican citizens don't have SS numbers. What is he to do?
Well, first I think that he needs to go up the food chain to get an opinion from someone a bit higher up that the current person he is speaking to.

Inherited retirement money (unless its in some form of Roth account) IS taxable to the person who inherits it so that would explain why the current person he is speaking to thinks that an SSN is required. However, a foreign national can obtain an ITIN (Individual tax identification number) from the IRS is order to deal with that...and that isn't actually necessary until it comes time for them to actually receive money that is taxable.
 

ALawyer

Senior Member
The problem seems to be a lack of understanding by the person he spoke with. Your fired can name a non-citizen, non-resident as beneficiary of his tax qualified plan. However, Uncle Sam will want to make sure that the money his tax qualified plan -- which presumably has not heretofore been taxed -- pays its share of taxes and will require the plan administrator to do the needed withholding. https://www.irs.gov/retirement-plans/plan-distributions-to-foreign-persons-require-withholding
 

Oilcan

New member
Thanks for all the reply's. Just to add something: he has a nephew who lives and works in Los Angles. Last year he had an oral agreement with the nephew. He would name the nephew as beneficiary who has a SS #, would receive the proceeds and would then pay the sister (nephews mother) in Mexico. Kind of shaky to me! For example as if the nephew is having financial difficulties or just wants to keep the money himself he can do it. Plus the nephew would be liable for the taxes. Not a good situation! I will pass on the above suggestions. Thanks again!
 

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