Are your Retirement Assets Exposed to US Estate Tax?
- Michael Isbister CFP
- Apr 29
- 4 min read
Hello everyone, and welcome to the Retiring Canada Podcast. In today’s episode, we’re diving into an important and often overlooked topic: Are your retirement assets exposed to U.S. estate tax?
Here’s what we’ll cover:
What the U.S. estate tax is
Two key questions to determine if you may be subject to it
Upcoming changes in 2026 that could expose more Canadians to this tax
Strategies to help reduce or eliminate your exposure
And finally, some key action items to consider
Introduction to the Issue
For most Canadians, the idea of paying U.S. estate tax rarely crosses our minds. After all, we live in a different country and pay our taxes here in Canada.
But what if I told you that a portion of your assets might be subject to U.S. estate tax—or at the very least, might require filing a U.S. estate tax return?
You might be thinking, “That doesn’t apply to me—I don’t own a place down south.” But you might not be in the clear just yet.
In the last few months, I’ve encountered several prospective clients—Canadian residents, not U.S. citizens or U.S. taxpayers—who were potentially exposed to U.S. estate tax and didn’t even know it.
What Triggers U.S. Estate Tax Exposure?
It all comes down to the jurisdiction in which your assets are considered domiciled. Put simply: if an asset is legally situated in the U.S., it’s treated as a U.S. asset.
The two most common culprits?
U.S. real estate
U.S. company shares held directly
So, if you’re a snowbird spending winters in Palm Springs or Florida, you may already be familiar with the estate tax implications of owning U.S. property. But many Canadians don’t realize that their U.S. stock portfolio may also be subject to this tax.
This applies regardless of where you hold the investments—whether in a non-registered account or even in a TFSA or RRSP.
Here’s an important clarification: If you own U.S. companies through Canadian-listed mutual funds or ETFs, the IRS doesn’t consider these U.S. assets, so they’re not subject to U.S. estate tax. That’s because you own the fund, not the underlying stocks directly.
However, if you own U.S. company shares directly, you may be exposed.
Two Key Questions
If you own U.S. real estate or directly hold U.S. securities, ask yourself these two questions:
Do you own U.S. assets worth more than $60,000 USD?
Will your total worldwide estate exceed the U.S. lifetime estate tax exemption at the time of your death?
As of now, that exemption is just under $13 million USD. While that shields most Canadians from paying estate tax today, this exemption is scheduled to drop to around $5 million USD in 2026.
An Example
Let’s walk through an example:
Imagine you live in Vancouver. You own:
A primary residence worth $5 million
A vacation property worth $2 million
An investment portfolio worth $3 million, including $1 million in U.S. stocks held directly
Your estate totals around $10 million CAD, or about $7 million USD.
Under today’s $13M USD exemption, you wouldn’t owe any U.S. estate tax. However, since your U.S. assets exceed $60,000, your estate would still need to file a U.S. estate tax return—even if no tax is payable.
But fast-forward to 2026: if the exemption drops to $5M USD, you now have a potential liability. Based on our example, the estate could owe approximately $40,000 USD, even after credits.
There’s a link to the calculator I used in the show notes if you want to run the numbers yourself.
Strategies to Consider
Because this is a complex area, please speak with a cross-border tax expert if you have more than $60,000 USD in U.S.-domiciled assets. That said, here are a few planning strategies to explore:
1. Use Canadian Mutual Funds or ETFs
Rather than owning U.S. stocks directly, consider Canadian-listed mutual funds or ETFs. Alternatively, using a Canadian holding company may shield assets—but note this can add complexity and higher tax on passive income.
2. Gift or Restructure Ownership
You might reduce exposure by:
Gifting U.S. assets during your lifetime (watch for U.S. gift tax rules)
Using trusts or family limited partnerships for real estate
Joint ownership with a spouse (consider contribution rules carefully)
Be aware: these strategies may trigger capital gains.
3. Leverage the Canada–U.S. Tax Treaty
The treaty offers helpful benefits:
A pro-rated unified credit for U.S. assets
A marital credit with proper structure
Deductions for certain U.S. state taxes and expenses
4. Use Life Insurance
Life insurance can provide liquidity to cover potential U.S. estate taxes, avoiding forced asset sales—especially useful for large U.S. real estate or stock holdings.
5. Annual Monitoring & Valuation
Review your estate annually. If your net worth exceeds $5M CAD and you have over $60,000 USD in U.S. assets, start forecasting the potential 2026 impact.
Action Step & Closing
So, your one action item for today:
👉 If you hold more than $60,000 USD in U.S. real estate or stocks, it’s time to run the numbers. Calculate your total worldwide estate in U.S. dollars at today’s exchange rate. If that number is near or over $5 million USD, keep this on your radar. Planning ahead now could save your estate from a costly surprise later.
I strongly encourage you to talk to your tax advisor—understand your potential liability and explore ways to mitigate or eliminate it.
That’s it for today’s episode!
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All comments are of a general nature and should not be relied upon as individual advice. The views and opinions expressed in this commentary may not necessarily reflect those of Harbourfront Wealth Management. While every attempt is made to ensure accuracy, facts and figures are not guaranteed, the content is not intended to be a substitute for professional investing or tax advice. Please seek advice from your accountant regarding anything raised in the content of the podcast regarding your Individual tax situation. Always seek the advice of your financial advisor or other qualified financial service provider with any questions you may have regarding your investment planning.