In today’s globally mobile and interconnected world, it’s increasingly common for Canadians to own U.S.-situs assets—whether it’s a vacation home in Florida, an investment property in Arizona, or shares in U.S. corporations. However, what’s less commonly understood is the U.S. estate tax regime that applies to non-U.S. persons at death.
For Canadians with U.S. assets, dying without proper planning can trigger unintended U.S. tax exposure, compliance burdens for executors, and even delays in asset distribution. Understanding how U.S. estate tax applies—and how to structure ownership proactively—can help reduce the impact on heirs and ensure a smoother estate administration process.
At Cardinal Point Wealth Management, we help Canadian clients navigate the complex web of cross-border estate planning. This article outlines what Canadians (and their families) need to know about dying with U.S.-situs assets, including IRS Form 706-NA filing requirements, tax thresholds, deadlines, and planning techniques.
What Are U.S.-Situs Assets?
U.S. estate tax applies to nonresident aliens (NRAs) who own certain U.S.-connected assets at death. These are referred to as U.S.-situs assets.
Common U.S.-Situs Assets Include:
- U.S. real estate (homes, condos, land)
- Tangible personal property located in the U.S. (e.g., vehicles, artwork)
- Shares of U.S. corporations
- Interests in U.S. partnerships or LLCs (in some cases)
- U.S. bank deposits held in brokerage accounts (in limited situations)
Assets that are not considered U.S.-situs:
- U.S. Treasury bills or bank deposits in U.S. commercial banks (not brokerages)
- Shares of Canadian or other foreign corporations
- U.S. mutual funds domiciled in Canada
U.S. Estate Tax Basics for Canadians
Unlike Canada, the U.S. imposes an estate tax based on the fair market value of assets at death. While U.S. citizens and residents enjoy a large unified credit exemption (USD $13.99 million in 2025), nonresident aliens do not.
Key U.S. Estate Tax Facts for Canadians:
- NRAs are subject to estate tax on U.S.-situs assets only.
- They receive only a USD $60,000 exemption from U.S. estate tax.
- Estate tax rates range from 18% to 40%.
- Form 706-NA must be filed by the executor if the decedent had over USD $60,000 in U.S.-situs assets.
Example: A Canadian who dies owning a $500,000 Florida property and $100,000 in Apple stock could face U.S. estate tax on $540,000 (after the $60,000 exemption).
The Canada–U.S. Tax Treaty: Partial Relief
Fortunately, the Canada–U.S. Tax Treaty (Article XXIX-B) provides Canadians with some relief from U.S. estate tax.
Treaty Benefits Include:
- A pro rata share of the unified credit can be claimed. For example, if the U.S. assets represent 10% of the worldwide estate, the estate may claim 10% of the 2025 $13.99 million unified credit (~$1.99 million).
- Canadian surviving spouses may receive spousal deferral using a Qualified Domestic Trust (QDOT), if structured correctly.
However, to claim these benefits:
- The executor must file Form 706-NA and elect to use the treaty.
- Full disclosure of worldwide assets is required.
IRS Form 706-NA: Who Must File and When?
Form 706-NA, “United States Estate (and Generation-Skipping Transfer) Tax Return” for nonresident aliens, is the central U.S. filing required for Canadian decedents with U.S.-situs assets.
Filing Threshold:
- Required if gross U.S.-situs assets exceed $60,000 at the time of death.
- This includes real estate, securities, and other U.S.-connected property.
Deadline:
- Due nine months after the date of death.
- A six-month extension can be requested using Form 4768.
Where to File:
Send Form 706-NA to:
- Department of the Treasury
- Internal Revenue Service Center
- Kansas City, MO 64999
(As of June 2025; subject to change—check IRS website for updates.)
Processing Time:
- The IRS typically takes 12–18 months to process Form 706-NA.
- Delays are common, especially if treaty benefits are claimed or valuations are complex.
During this period, the estate may be unable to sell or transfer U.S. assets, such as real property or shares, without obtaining a Transfer Certificate from the IRS confirming that estate tax obligations have been satisfied.
The Transfer Certificate Requirement
To release U.S.-situs assets held by a Canadian decedent, U.S. custodians (like brokerages or banks) generally require a Transfer Certificate issued by the IRS. This certificate shows that:
- Form 706-NA has been filed.
- U.S. estate tax has been paid or determined not to be owed.
Without this certificate:
- U.S. institutions may freeze the asset.
- Executors may be unable to distribute or sell assets.
- The estate may suffer liquidity issues or delays.
Obtaining a Transfer Certificate can take a year or longer, especially if the estate claims treaty relief and needs to provide a global valuation.
Estate Planning Options to Reduce or Avoid U.S. Estate Tax
The best time to address U.S. estate tax exposure is before death, through careful planning of how U.S.-situs assets are owned. Options include:
Canadian Holding Corporation
- U.S. property is held via a Canadian corporation.
- At death, the decedent owns foreign shares, not U.S. property—thus, no U.S. estate tax.
- May trigger Canadian shareholder benefit issues if property is used personally.
- More common for rental or investment properties.
Canadian Trust
- Trust owns the U.S. assets for the benefit of the Canadian individual.
- Can avoid U.S. estate tax if structured to remove ownership/control from the decedent.
- Trust must not be a “grantor trust” under U.S. law if beneficiaries are U.S. persons.
- Can be complex and expensive to maintain.
Gifting During Life
- Gifting U.S. assets before death may remove them from the U.S. estate tax base.
- However, the U.S. gift tax applies to gifts of U.S. real property by nonresidents.
- Canadian tax also applies to the deemed disposition of gifted assets.
Life Insurance Planning
- Use life insurance to cover anticipated estate tax liability.
- Ensure liquidity in Canadian dollars to pay estate costs and IRS obligations.
Canadian Tax Considerations at Death
While Canada does not levy estate tax, it imposes a deemed disposition of all capital property at death. For Canadian tax purposes:
- U.S. real property is deemed sold at FMV.
- Capital gains are included in the final T1 return.
- Foreign tax credits can help reduce double taxation if U.S. estate tax is payable.
However, U.S. estate tax is not a direct creditable tax under Canadian law (because it’s based on value, not income). Still, the CRA may allow partial relief through administrative positions or where income overlap occurs.
Practical Steps for Executors of Canadians with U.S.-Situs Assets
If you’re administering the estate of a Canadian who owned U.S. assets, here’s what to do:
Step 1: Inventory U.S.-Situs Assets
- Real estate (get appraisals)
- U.S. securities (date-of-death values)
- Tangible assets (e.g., vehicles or art in the U.S.)
Step 2: Determine if Form 706-NA Is Required
- If U.S.-situs assets > $60,000, the form must be filed.
- Even if estate tax is not ultimately due, the filing is needed to receive a Transfer Certificate.
Step 3: Engage U.S. Counsel or Tax Advisor
- Filing Form 706-NA correctly requires knowledge of both U.S. and Canadian tax law.
- Treaty relief must be claimed properly.
- Missing forms or misclassifications can lead to delays or penalties.
Step 4: Request Transfer Certificate
- After submitting Form 706-NA, apply for the Transfer Certificate.
- Be prepared for a long processing time.
Real-Life Case Study: A Canadian Snowbird’s Estate
Scenario:
Margaret, a 76-year-old Canadian, dies owning:
- A $750,000 vacation home in Arizona
- $300,000 of U.S. stocks in a brokerage account
- $3 million of Canadian assets (residence, investments)
U.S. Estate Tax Implications:
- U.S.-situs assets: $1.05M
- Total worldwide estate: $4.05M
- Ratio: 25.9%
- Treaty relief allows 25.9% of $13.99M = $3.62M unified credit
- Since U.S.-situs assets are < $3.62M, no estate tax is due
However, the estate must still file Form 706-NA to claim treaty relief and obtain the Transfer Certificate to distribute or sell the Arizona home and stocks.
Summary Planning Considerations for Canadians with U.S. Assets
| Planning Topic | Key Takeaways |
|---|---|
| U.S.-Situs Assets | Subject to U.S. estate tax for Canadian decedents |
| Form 706-NA Filing | Required if U.S. assets exceed $60,000; due 9 months after death |
| Treaty Relief | Proportional unified credit available; full asset disclosure required |
| Transfer Certificate | Needed to transfer or sell U.S. assets; can take 12–18 months to obtain |
| Ownership Structures | Consider Canadian corporations or trusts to avoid U.S. estate tax |
| Gift Tax Rules | Gifts of U.S. real estate can trigger U.S. gift tax; caution required |
| Canadian Tax | Deemed disposition applies; CRA may offer limited credit for U.S. estate tax |
| Executor Checklist | Identify U.S. assets, file 706-NA, get valuations, and seek expert advice |
Conclusion
For Canadians with U.S.-situs assets, estate planning doesn’t stop at the border. Whether you’re a snowbird with a Florida condo, an investor in U.S. stocks, or someone whose vacation property has appreciated significantly, you need a coordinated cross-border estate plan.
Filing Form 706-NA, understanding the limitations of the $60,000 exemption, and planning for probate and liquidity are all essential to protecting your legacy and reducing the burden on your heirs. With proactive ownership structures and clear documentation, it’s possible to enjoy U.S. assets today while ensuring your estate is prepared for tomorrow.
At Cardinal Point Wealth Management, we specialize in helping Canadian individuals and families navigate these cross-border complexities. Whether you’re considering a U.S. property purchase, revising your Will, or managing an estate with U.S. ties, we’re here to guide you every step of the way.