In today’s dynamic estate planning landscape, affluent families—particularly those with cross-border ties between Canada and the U.S.—must navigate both opportunity and complexity. While tax law provides powerful tools for wealth transfer, effective estate planning requires more than legal documents. It demands foresight, communication, and alignment across generations.
For families with U.S. or Canadian citizenship, U.S.-situs assets, or beneficiaries on both sides of the border, the 2025 window offers a unique opportunity. With the U.S. federal estate and gift tax exemption scheduled to fall by half on January 1, 2026 (from $13.99M to roughly $7M per person), timely action could yield millions in tax savings.
This article outlines strategic principles for cross-border estate planning and provides real-world insights for families looking to preserve wealth, reduce taxes, and maintain harmony across generations and jurisdictions.
Who Are Cross-Border Multi-Generational Families?
At Cardinal Point, we define cross-border multi-generational clients as families with:
- Wealth exceeding the lifetime needs of the founding generation;
- Canadian or U.S. citizenship or residency (or both);
- U.S.-situs assets (real estate, securities, business interests); and
- Children, grandchildren, or trusts situated across jurisdictions.
These families often own illiquid assets such as family businesses, real estate, or limited partnerships, and require coordination of U.S. and Canadian estate, gift, and trust rules.
The 2025 Planning Opportunity—and What Happens After
As of 2025, each U.S. citizen or domiciliary has a $13.99M USD exemption from estate and gift taxes. This is not applicable to Canadians—unless they own U.S.-situs property, in which case a pro-rata exemption may be available under the U.S.-Canada Tax Treaty.
Without legislative changes, this exemption will drop to ~$7M USD on January 1, 2026. Above that threshold, U.S. assets are subject to a 40% estate tax. The Generation-Skipping Transfer (GST) exemption—used to shield gifts to grandchildren or future generations—is also set to be reduced on January 1, 2026, without legislative changes.
Cross-border implication: Canadians with U.S. assets may want to act now to lock in treaty-based planning advantages and consider strategies such as gifting, trust funding, or entity restructuring.
Strategic Tools for Cross-Border Families
1. Annual Exclusion Gifting
Every U.S. taxpayer can gift $19,000 USD per recipient annually (or $38,000 USD if gifting as a couple) without using lifetime exemptions. Canadians are not subject to gift tax but should beware of attribution rules and capital gains carryover on gifted property.
Tip: Use annual exclusions to gradually move wealth out of taxable estates while maintaining simplicity.
2. Spousal Lifetime Access Trust (SLAT)
A SLAT allows one spouse to make a gift to an irrevocable trust benefiting the other, thereby removing assets from the estate while maintaining indirect access.
Cross-border caution:
- Ensure SLATs are structured under U.S. trust law if the grantor is a U.S. person.
- Coordinate with Canadian tax advisors to avoid FAPI, deemed disposition, or double tax.
3. Generation-Skipping Transfer (GST) Trusts
GST-exempt trusts can avoid U.S. estate tax for multiple generations. This is particularly powerful for families with U.S. citizen grandchildren or those planning U.S.-domiciled dynasty trusts.
Why this matters for Canadians:
- If gifting U.S. real estate or U.S. shares to future generations living in the U.S., use a properly structured U.S. trust to avoid GST tax.
- GST exemption is not portable—each U.S. spouse must use it or lose it.
4. Grantor Trusts
U.S. grantor trusts allow the donor to pay income tax on trust income, enabling the trust to grow tax-free.
- Useful in cross-border planning when the grantor remains a U.S. taxpayer.
- Can be layered with SLATs, GST trusts, or Installment Sales.
Canadian caveat: Canadian beneficiaries may trigger income attribution and trust reporting obligations under CRA rules. Careful planning and compliance are critical.
5. Discounted Transfers & Installment Sales
Ownership in U.S. or Canadian private businesses or real estate can be transferred using valuation discounts and sales to trusts.
Example:
A Canadian-U.S. family gifts a minority interest in a U.S. business to a GST-exempt trust at a 30% discount. With the full 2025 exemption, they transfer ~$40M USD of value using only $28M USD in exemption, locking in estate tax savings before 2026.
Installment sales to U.S. grantor trusts can further freeze estate value while passing appreciation to heirs.
Coordinating Strategies Across Borders
Best-in-class estate plans combine:
- Exemption-based lifetime gifts;
- SLATs for spousal security;
- GST-exempt dynasty trusts;
- Grantor trust status for tax efficiency; and
- Valuation discounts and installment sales.
Canadian Consideration: Gifting and trust strategies must be reviewed under Canadian rules for deemed disposition, income attribution, and compliance reporting (e.g., T1135, T1141, T3 return obligations).
More Than Taxes: Preserving Values Across Generations
Studies show that 70% of intergenerational wealth transfers fail, not because of bad tax planning, but due to:
- Breakdown in communication;
- Unprepared heirs; and/or
- Lack of shared family vision.
At Cardinal Point, we help families align technical planning with human priorities by:
- Establishing family governance structures;
- Conducting family meetings and education; and
- Designing legacy strategies rooted in shared values.
Final Thoughts: A Narrow Window for Meaningful Planning
The temporary high U.S. exemption offers a once-in-a-generation planning opportunity. For Canadian and cross-border families, it’s also a chance to:
- Reassess U.S.-situs exposure;
- Update outdated trust or entity structures; and
- Use lifetime strategies that avoid the punitive 40% estate tax.
But waiting until 2026 may be too late.Start the conversation today with your cross-border advisory team at Cardinal Point. We specialize in estate and tax planning for families who live, invest, and leave legacies on both sides of the border.