Canadians With Property in the US — The Estate Tax Question

A retired teacher in Mississauga buys a one-bedroom condo in Naples, Florida, in 2009 for US$210,000. By 2026 it is worth roughly US$420,000. She wonders, sensibly, whether her estate will face US tax when she dies. Her financial planner mentions the US$60,000 threshold and US estate tax. Her tax accountant mentions the treaty credit. Her son, who would be the executor, has no idea what either of them is talking about. The probable answer for this estate, with a worldwide value of about C$2.4 million, is that the US wants a filing but does not actually want any tax — but getting to that answer requires understanding a system that almost every Canadian estate-tax discussion oversimplifies.

This guide is the working-through of how US estate tax applies to Canadians, when it matters in practice, and what planning options exist for those whose exposure is meaningful. For the operational side of administering an estate with US property, see cross-border probate. For broader context, see our pillar on what an executor does in Canada.

The baseline US rule #

US estate tax applies to "non-resident not a citizen" decedents on the value of their US-situs property at death.^[4] The relevant statute (IRC § 2101 et seq.) imposes the tax at progressive rates up to 40%, with a default exemption of US$60,000 under IRC § 2102 — orders of magnitude lower than the resident exemption.

The categories of US-situs property:

• US real estate (always — Florida condo, Arizona house, Maine cottage)
• Tangible personal property located in the US at death (car at the condo, art on the wall)
• Stocks of US corporations (Apple, Microsoft, Berkshire Hathaway — wherever held)
• Most US bonds and debt obligations (subject to portfolio interest exemption)
• Interests in US partnerships (depending on structure)

The exclusions:

• Stocks of Canadian or non-US foreign corporations held anywhere
• Most cash deposits in US banks
• US life insurance proceeds paid to the estate

A Canadian with the Florida condo, US ETFs in their Canadian brokerage, and a small US-bank deposit has US-situs assets that could collectively exceed US$60,000 and trigger a Form 706-NA filing obligation.

The treaty mechanism #

Article XXIX-B of the Canada-US tax treaty is what saves most Canadian estates from actually paying US estate tax.^[1] The treaty provides three relevant benefits:

The prorated unified credit #

A Canadian decedent can claim a portion of the US resident unified credit. The credit equals:

Resident credit × (US-situs assets ÷ worldwide estate)

For 2026, the US resident unified credit on a roughly US$15 million exemption is approximately US$5.95 million of credit. The prorated credit is applied against the US estate tax computed on the US-situs estate, with the proration capping the benefit at the share of the worldwide estate that is US-situs.

Worked example. A Canadian dies in 2026 with US$500,000 of US-situs assets and a C$5 million worldwide estate (roughly US$3.7 million at typical exchange rates).

• US-situs / worldwide = US$500,000 / US$3.7 million = 13.5%
• Prorated credit = 13.5% × US$5.95 million = US$803,000
• Tentative US tax on US$500,000 of US-situs = approximately US$155,800
• Credit exceeds tax → no US estate tax owed
• Form 706-NA still must be filed to claim the credit

The marital credit #

A separate treaty benefit. Where the deceased leaves US-situs property to a surviving spouse who is a resident of Canada or the US (but not a US citizen), the estate can claim an additional marital credit of up to the unified credit otherwise available. The combined effect is that, in most cross-border spousal scenarios, the US estate tax exposure is fully eliminated.

The marital credit requires the surviving spouse to consent to treaty positions in filing. The mechanics need a cross-border tax accountant — Form 706-NA plus treaty statements.

The deemed-disposition coordination #

Independent of the US estate tax issue, Canada's deemed-disposition rule treats the deceased as having sold all capital property at fair-market value immediately before death. So the Canadian estate pays Canadian capital-gains tax on the appreciation of the US condo. Where the same property also draws US estate tax, the treaty provides credit mechanisms to prevent strict double taxation, though the calculations are intricate.

The 2026 exemption — now permanent #

The US resident exemption rose sharply under the 2017 Tax Cuts and Jobs Act and had been scheduled to sunset at the end of 2025. That sunset did not happen: the One Big Beautiful Bill Act (enacted July 2025) made the higher exemption permanent and set it at US$15 million per individual for 2026, indexed for inflation.

For Canadians planning around US estate tax, the practical implication is stability: the treaty unified credit remains large, so most Canadians whose worldwide estate is well below US$15 million continue to owe no US estate tax — though a Form 706-NA filing may still be required once US-situs assets exceed the US$60,000 threshold.

When does a Canadian actually owe US estate tax? #

For most Canadians, never. The combination of the US$60,000 threshold, the treaty unified credit, and the marital credit means that:

• Below US$60,000 of US-situs assets — no filing, no tax.
• Above US$60,000 of US-situs assets but worldwide estate well below the US resident exemption — filing required, no tax due (the prorated credit covers it).
• Worldwide estate exceeds the US resident exemption AND substantial US-situs assets — actual US estate tax exposure. This is the high-net-worth Canadian profile.

A Canadian with C$10 million in worldwide assets including a US$2 million Florida property faces real exposure. A Canadian with C$2 million in worldwide assets including a US$300,000 Florida condo does not.

Filing mechanics #

Even where no tax is due, Form 706-NA is required if US-situs assets exceed US$60,000.^[2] The filing process:

• Form 706-NA — the return itself, with the worldwide estate value and the US-situs property value disclosed.
• Treaty statements — additional disclosures to claim the prorated unified credit and any marital credit.
• Supporting valuations — appraisals or comparable-market evidence for the US property.
• Estate executor identification — the Canadian executor is the legal representative; in some cases a US-resident co-executor for the ancillary US probate also signs.

The filing deadline is nine months from the date of death, with a six-month automatic extension available on a timely request. The filing is also what lets the estate obtain IRS clearance (a closing letter or transfer certificate), which US title and financial institutions commonly want to see before completing a transfer.

Three observations are worth pulling out — first, no-tax filings still require accountants familiar with the treaty calculation; second, the work involved in filing Form 706-NA where no tax is due is similar in volume to a small business tax return; third, professional fees for preparing the return are rarely under US$3,500-$8,000 and can be much higher for complex worldwide estates.

Planning options #

For Canadians whose US-situs exposure is meaningful, planning options exist. None are universally good — each has trade-offs that need to be evaluated against the specific facts.

Direct ownership (default) #

The simplest structure. The Canadian holds title to the US property in their personal name. Cleanest income-tax treatment, cleanest treaty access on estate tax, simplest administration when one spouse predeceases — but full US estate tax exposure if the threshold is exceeded.

Joint ownership with right of survivorship between spouses #

Property passes to the surviving spouse outside probate. US estate tax presumes 100% inclusion in the first-to-die's estate unless the survivor can prove contribution, but the marital credit usually addresses this. Good for spousal property transfers; complicates the picture where joint ownership is between non-spouses.

Ownership through a Canadian corporation #

The Canadian corporation owns the US property; on death, the Canadian's shares pass to the estate, and US estate tax does not directly apply (the asset is corporate, not personal). Trade-off — adverse Canadian shareholder-benefit tax on personal-use property held in a corporation. Generally only used for true investment properties, not personal-use vacation homes.

Ownership through a Canadian partnership or LP #

Can convert US-situs real estate into a partnership interest that is sometimes not US-situs. Highly fact-specific and requires sophisticated structuring.

US revocable trust #

Sometimes used by Canadian planners but offers no US estate tax benefit on its own (revocable trusts are includible in the grantor's estate for estate-tax purposes). Mostly used for probate-avoidance, not tax planning.

Each of these structures has tax, income tax, family-law, and administrative implications that need to be analyzed by both Canadian and US lawyers and accountants. A single estate-planning conversation with a cross-border specialist is rarely enough.

Who needs to act #

Not every Canadian who owns US property needs to do estate-tax planning. A simple decision tree:

• US-situs assets under US$60,000? No action required.
• US-situs assets US$60,000 to a few hundred thousand and worldwide estate under US$5 million? Document the property's purchase price (cost basis), keep US property records with Canadian estate records, and warn your executor that a Form 706-NA filing may be needed. No restructuring required.
• US-situs assets significant or worldwide estate near or above the US resident exemption? Engage a cross-border estate-planning specialist. The cost of planning is dwarfed by the potential tax exposure.

For the operational administration with US property, see cross-border probate and snowbirds estate planning.

What we focus on at It's Simple Will #

Our app builds Canadian wills for Canadian estates. It is designed to handle Canadian-situs property cleanly and is not the right tool for the high-net-worth cross-border planning conversation. If you have US property worth a few hundred thousand dollars or more, build your Canadian will at app.itssimplewill.ca as the foundation, and engage a cross-border estate-planning specialist for the US-side analysis. The Canadian will plus the Life Discovery Kit gives your executor a clean Canadian starting point; the specialist provides the US-side overlay. Pair the will with the executor checklist for the broader operational sequence.