Q: As a Canadian, what is my exposure to U.S. estate tax?
A: Estate tax is based on a graduated rate system from 18% to 35% with a unified credit of $13,000 equivalent to a value of $60,000.
For non-U.S. citizens, only U.S. situs assets such as real estate, tangible property situated in the U.S., stock certificates of U.S. corporations are included in the gross estate.
The Canada\U.S. tax treaty allows for a $1,730,800 credit afforded to U.S. citizens, prorated, based on gross U.S. assets to your total world-wide assets.
The treaty allows for a martial credit where property transfers to your spouse. Other treaty provisions may apply.
For deaths occurring in 2010, the “no estate tax rule” will only apply if the executor makes a special election and files an information return IRS Form 8939.
The top graduated rate may revert to 55% (2013) with a prorated unified credit of only $345,800. If legislation is not enacted, planning should be considered even though the prorated unified and marital credits may currently be sufficient.
Where one spouse is a U.S. citizen, planning and the incidence of the tax is more complex.
Your period of ownership and anticipated value at the time of death will help in determining the best ownership vehicle.
You may consider modifying your present ownership, keeping in mind both Canadian and U.S. income tax legislation, U.S. gift and land transfer taxes.