U.S. Estate Tax Exposure for Canadian Residents (Even If You're Not a Citizen)

The misconception that gets repeated everywhere

A common piece of half-information says that Canadians with U.S. assets get only a US$60,000 exemption from U.S. estate tax. That's the figure in the U.S. domestic rules — but the Canada-U.S. Tax Treaty overrides it for Canadian residents. The treaty gives Canadians a pro-rated share of the full U.S. unified credit, which is dramatically larger. For most Canadians with modest U.S. holdings, the treaty eliminates the tax entirely. For Canadians with very large estates, real exposure exists and is worth planning around.

The goal of this article is to get the framework right so you know whether to worry — and what to do if you should.

What counts as a U.S. situs asset

The U.S. asserts estate tax jurisdiction over assets it considers "situated" in the U.S. (so-called U.S. situs property). The most common categories for Canadian residents:

U.S. stocks held directly in any account — Canadian or U.S.-based — are U.S. situs. This includes Microsoft, Apple, Tesla, etc., held in a Canadian brokerage non-registered, RRSP, or TFSA.
U.S. real estate, including a Florida or Arizona condo, a vacation property in Maine, or U.S. rental real estate.
Tangible personal property physically located in the U.S. — a car parked at a U.S. vacation home, art, jewellery.
Some U.S. business interests held directly.

Notably not U.S. situs:

U.S. stocks held inside a Canadian-listed mutual fund or ETF (the fund itself is the legal owner — you own units of a Canadian trust). This is one of the cleanest planning techniques.
U.S. dollar bank deposits at U.S. banks (specifically excluded under U.S. domestic rules).
U.S. Treasury bonds (specifically excluded by treaty/statute).
ADRs of non-U.S. companies traded on U.S. exchanges.

How the exposure calculation works

There are two questions: are you over the worldwide threshold at all, and if so, how much of the U.S. unified credit can you actually use.

The 2026 U.S. unified credit shelters roughly the first US$13.6 million per person from estate tax (this number is scheduled to drop in 2026 under current legislation, but the Treaty mechanic is the same). For a Canadian resident, the treaty allows you to claim a portion of that credit equal to:

(Value of U.S. situs assets) ÷ (Value of worldwide estate) × (Full U.S. unified credit)

So if your worldwide estate is CAD $4 million and you hold US$200,000 of Microsoft stock at death, your pro-rated credit easily covers the U.S. situs assets and there's no estate tax owing — even though the headline US$60,000 number would have suggested a problem.

By contrast, if your worldwide estate is CAD $30 million and you hold US$2 million of U.S. stocks, the calculation gets more interesting and may produce real tax owing — though the marital credit (a dollar-for-dollar additional credit equal to the unified credit if assets pass to a surviving spouse) often defers it.

When the worldwide estate matters most

The trap people fall into is assuming "I only have $200K of U.S. assets, so I'm fine." If your worldwide estate is small enough that the worldwide estate falls below the U.S. exemption (currently around CAD $18 million depending on the exchange rate), there is no U.S. estate tax owing regardless of the size of the U.S. portion. If your worldwide estate is above that, the U.S. portion is exposed, and the treaty pro-ration is the lever that determines how much.

Note this includes the full value of your principal residence, your RRSPs, your insurance proceeds — everything you own anywhere in the world.

Common planning techniques

For Canadians with material U.S. exposure, several structures are worth considering, in roughly increasing complexity:

Hold U.S. equity exposure through Canadian-listed ETFs or mutual funds. This single step removes the most common source of exposure. There is a small tradeoff in U.S. withholding tax on dividends inside a non-RRSP account, but for most people the estate-tax simplification is worth it.
Title U.S. real estate carefully. Joint ownership with right of survivorship between spouses doesn't avoid the estate tax (each spouse is deemed to own half), but proper structuring through a Canadian holding company, a partnership, or a cross-border trust can change the result. None of these are DIY exercises — they need a cross-border tax lawyer.
Use life insurance to fund the eventual estate-tax bill rather than restructuring the underlying assets. For families that want to keep U.S. real estate in family hands across generations, this is often the cleanest answer.

What about green-card holders living in Canada?

If you hold a U.S. green card, the U.S. treats you as a U.S. domiciliary for estate-tax purposes — which means worldwide estate exposure, not just U.S. situs assets. The exemption is also the full unified credit (currently US$13.6 million), so most people are still well below the threshold, but the planning conversation is fundamentally different and should not be conflated with the Canadian-resident-only analysis.

The filing question

Even when no tax is owing, a U.S. estate tax return (Form 706-NA) must be filed to claim the treaty pro-rated credit if the deceased held more than US$60,000 of U.S. situs assets at death. Without the filing, the IRS defaults to the US$60,000 exemption and assesses tax accordingly. The return is due nine months after death, with a possible six-month extension. This is a real filing — it requires an estate accountant familiar with cross-border work.

This is the kind of work we do

Cross-border estate planning rewards modelling — small structural changes (where U.S. equity is held, how a U.S. property is titled, whether life insurance is layered in) often translate into hundreds of thousands of dollars and significant simplification for the next generation. We work through the planning side and coordinate with cross-border lawyers and accountants on the legal and filing components. Book a complimentary consultation if you'd like to talk through your situation.