US estate tax exposure for Canadians owning USA stocks.

AUG 3, 2018


Written by: Howard Karpes, CPA, CGA

What country would think it could tax the deceased citizen and resident of another country?  The United States of America, that’s who.

Arguably, what I am about to tell you is a very specific circumstance but, in my opinion, it is highly unusual.

If you own physical property (land & building) in any country when you die that country has the right to tax you on that property at the time of your passing. 

But what about stocks?  Do you own American stocks in your portfolio?  Do you own more than $60,000 USD in your stock portfolio? You might be in trouble.

Let us begin with the definition of US situs property.  It includes real property ie. land and building; and stocks in U.S. corporations (such as Apple, Exxon or Walmart).  This however does not include non-domestic stocks listed on the NYSE such as Royal Dutch Shell. Situs property also includes personal property located in the country (an expensive car would count). 

The US has an exemption available for anybody who owns US situs property less than $60,000, but once you own more than $60,000, it comes down to your worldwide estate value.  If you have more than $11.2 million USD in total assets, you would owe American estate taxes.

Yes, I know these are good problems to have; $11.2 million dollars in estate value is quite a bit.  But millionaires are a dime a dozen in Metro-Vancouver and Toronto.

This is a big deal.

So what is the strategy to avoid this tax? 

The simplest is to not own US domestic stock and/or property in excess of $60,000.  However, since this is generally not done in a diversified portfolio you probably need further strategies. 

Further Reading:

Canada USA tax treaty Article XXIX B Taxes Imposed by Reason of Death