Many Canadians will be exposed to U.S. estate tax on their deaths and don’t know it. In fact, any person owning “U.S. situs property” on death could have an estate tax liability, even if they’ve never set foot in the U.S.

In this bulletin, we’ll describe who is liable for U.S. estate tax (i.e. residents and non-residents), how it is calculated, and give you some helpful tips to reduce your exposure.

Rather than a deemed disposition of all property on death (with resulting tax consequences) like we have in Canada, the U.S. imposes an estate tax based on the fair market value of a person’s estate on death.

The types of assets included in the estate tax calculation differ, depending on your U.S. residency status at the time of death.

Persons may be considered residents of the U.S. for estate tax purposes, even if they are not fully taxable on their income in the U.S. This is because the rules are slightly different for estate taxes than they are for regular income taxes.