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by Sumiyo Tymchuk
February 12, 2020

US Estate Tax Issues for Canadian Residents

What are the liabilities and what actions should you take when it comes to US estate tax for Canadian residents?

Upon the death of an individual who is a US citizen, green card holder, or “domiciled” individual, the individual is subject to US Estate or Inheritance Tax (referred to as “US Estate Tax”).

What surprises people is that an individual who is not a US citizen, green card holder, or not “domiciled” in the United States may be subject to US estate taxes because the individual owns certain US assets.

You may be liable for the US Estate Tax for Canadian residents if you own US-situs assets that include, but are not limited to:

  • US real estate

  • Shares of US companies (both private and public)

  • And other US securities including those held in Canadian brokerage accounts  

The US Estate Tax for Canadian residents will apply once the value of the US-situs assets is above $60,000. An Estate tax return will need to be filed by the Individual’s estate to report the value and calculate the US Estate Tax liability.

US Estate Tax Exemption

Under the Canada-US Tax Treaty, Canadian residents are allowed the same exemption as US residents; the current exemption is $11,580,000 (2020).

However, the exemption must be prorated based on the ratio of the US-situs assets over the individual’s world-wide assets. This means the larger the total estate value, the smaller the exemption that is available.

This exemption is also scheduled to be reduced to approximately $6,000,000 after 2025. In addition, this US estate tax exemption is also subject to change anytime before that date if the US Estate Tax law is amended.

If you have questions about US estate tax for Canadian residents and you have US-situs assets, we suggest that you speak to your accountant and your executors. You will need to quantify the potential liability and determine if there are any actions that can be taken now to manage this exposure.  

Please contact the Manning Elliott Tax Team with any questions you may have by submitting a contact form inquiry.

This content is believed to be accurate as of the date of posting. Tax laws are complex and are subject to frequent change. Professional advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.