Canadian snowbirds who own U.S. property and pass away leaving a worldwide estate that exceeds a certain value should be aware that they may be subject to the hefty U.S. estate tax of up to 40%.
Until recently, Canadians were generally subject to U.S. estate tax if they passed away owning U.S. assets - including U.S. real estate, shares in U.S. corporations or U.S. business assets - valued at over $60,000 USD and their worldwide estate was valued at over $5 million USD.
However, in December 2017, President Trump gave an inadvertent (if temporary) gift to wealthier Canadians when he signed into law the Tax Cuts and Jobs Act. Among the many changes was the doubling of the federal estate and gift tax exemption from $5 million USD to $10 million USD.
Essentially, this means that Canadians who previously would have been subject to U.S. estate tax if the value of their estate exceeded $5 million USD may no longer be subject to the tax unless the value of their estate exceeds $10 million USD.
The exemption increase is effective from 2018, expires in time for the 2026 tax year and is applicable for individuals dying after Jan. 1, 2018.
Please note that the specific rules and requirements surrounding who is subject to U.S. estate tax and who is eligible for an exemption are extremely complex.
Accordingly, as with all things related to death and taxes, we highly recommend that you engage a qualified cross-border tax and legal expert to advise you on this issue.