If the deceased owned US or other foreign property there may be taxes owing in that jurisdiction. QuickEstate™ does not provide tax advice. The executor should retain the services of a Canadian accountant well versed in US or foreign tax. Most mid sized and large Canadian accounting firms have foreign tax experts.
If the deceased owned “US situs assets”, meaning assets located in the US, they may be subject to US estate tax. This includes assets such as US real estate, the securities of US based companies, US bank accounts etc.
Commonly held US investment vehicles held by Canadians that are not considered US situs assets and are not subject to US estate tax may include:
- Mutual funds invested in US securities but managed by a Canadian or non-US investment manager
- Certain US indexation products, such as exchange traded funds, managed by a Canadian or non-US company
- Shares of a foreign company that trade in the US market, but whose head office is outside the US
If the deceased was a US citizen living in Canada at their death, the above assets may be subject to US estate tax. The executor must confer with the accountant on this issue.
There are US estate tax exemptions for US citizens and for Canadians and other non-residents who own US situs assets on death. The exemptions are based on the value of the deceased’s worldwide estate. If the value of the deceased’s estate falls below the exemption limit, they will not be subject to US estate tax. The exemption limit and US estate tax rates are subject to change every few years.
The executor should be aware that where there is US estate tax owing, it is levied on the current market value of the US asset. If, for example, the deceased owned a recreational property that is subject to US estate tax and has a fair market value of $1,000,000 at their death, the entire amount is subject to the prevailing US estate tax rate.
In contrast, tax at death in Canada is only levied on the deceased’s unrealized capital gain on particular assets.
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