For dual citizens of Canada and U.S. or green card holders

Tiffany Woodfield
Jan 17, 2019
3 min read

Updated: Jun 22

Written by Tiffany Woodfield, TEP, Associate Portfolio Manager, CRPC®, CIM®

For dual citizens of Canada and U.S. or green card holders

As a dual citizen of Canada and the U.S., do I need to worry about US Estate Tax?

US Estate Tax (“USET”)

The US imposes a federal estate and gift tax that applies to all US citizens, regardless of residency.

This is based on a U.S situs asset which includes real property located in the U.S and shares of U.S publicly traded securities even if held in an RRSP/RRIF account. This means if you are a US citizen living in Canada you may be subject to both the Canadian and US tax regimes at your death. The tax treaty does provide some relief.

The US Estate Tax starts at 18% and can be as high as 40% when the value of your estate reaches $1 million. It is applied where worldwide assets are above an exempt amount.

As of January 1, 2019, the exemption amount for US citizens/residents is US$11.4 million per person, potentially doubled for spouses. This exemption changes in 2026 when it will revert back to US$5 million per person. What is included in my estate? Your worldwide estate includes all property owned at death.

Think of everything you own…..

Registered plans
Life insurance proceeds, if you own the policy or proceeds are payable to your estate
Real estate
Money in the bank
Stocks and bonds
Partnerships

As a Canadian resident, you can transfer your assets to your Canadian–resident spouse on a rollover basis at the time of your death for Canadian tax purposes.

Essentially you can defer the payment of Canadian income tax until the death of your spouse. For US estate tax, you can defer if your assets are passed to a US citizen spouse. This is called a marital deduction.

The Canadian-U.S. Tax Treaty provides special relief if passed to a Canadian citizen. It allows a spousal credit to be taken by a U.S Person against a U.S estate tax. This credit is in addition to any unified credit or exclusion amount for U.S estate tax.

Potential Benefits of Transfers at Death

Property will receive a step-up in basis
Take advantage of the generous $11.4 million threshold
Tax circumstances of donor and done may change
Avoids out of pocket tax payment while living, if the gift tax applicable exclusion amount is exceeded

Consult with a team experienced in cross border matters for estate planning advice concerning taxation, investments and the laws.

Tiffany and John, the founders of SWAN, are experienced advisors who are registered in both Canada and the United States. We understand the challenges that the cross-border American citizen faces and have strong connections with other cross-border professionals in areas like tax, trust and estate planning, insurance and immigration.

By being registered in both countries and well connected to other cross-border centers of influence, we can offer you more than just a Canadian wealth management solution. We can offer you a holistic wealth management solution and coordinate your entire portfolio of assets to keep you on track to achieving your financial goals.

Raymond James advisors are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. Raymond James (USA) Ltd., member FINRA/SIPC. Raymond James (USA) Ltd. advisors may only transact business with residents of the states and/or jurisdictions for which they are properly registered

Next Steps

If you’re a Canadian resident or are planning on moving to Canada or the US and need assistance with moving and optimizing your investments, estate planning, wealth management and portfolio management, please get in touch. At SWAN Wealth, we specialize in Canadian financial planning, cross-border financial planning and cross-border wealth management.

About the Authors

TIFFANY WOODFIELD

Tiffany Woodfield is an Associate Portfolio Manager licensed in Canada and the USA, a Chartered Investment Manager (CIM), a Chartered Retirement Planning Counselor (CRPC), a Trust and Estate Practitioner (TEP) and the co-founder of SWAN Wealth Management, along with her husband, John Woodfield. Tiffany advises clients who live in Canada and the United States and want to simplify their cross-border financial plan, move their assets across the border, and optimize their investments to minimize their tax burden. Together, Tiffany and John Woodfield help their clients simplify their cross-border finances and create long-term revenue streams that will keep their assets safe whether they live in Canada or the U.S.