Canadians: Think You’re Safe from U.S. Estate Tax? Think Again.

Although recent political posturing may suggest otherwise, Canada and the U.S. have enjoyed a lengthy and mutually beneficial relationship. That is why many Canadians hold strong, deep connections with their neighbours to the south—many of which are financial in nature.

For affluent Canadian families with ties to the U.S. through citizenship, property ownership or investments, cross-border wealth and tax planning can be highly complex. Many ultra-high-net-worth (UHNW) families may not realize that their estates could be subject to U.S. estate tax, even without citizenship or significant U.S. connections. This means such families could be in for a rude awakening when Uncle Sam comes looking for them, hands fully extended. 

This undesired exposure stems from U.S. estate tax rules, which apply to certain U.S.-based assets regardless of the owner’s nationality. With notable changes announced for 2026, now is an ideal time for Canadian UHNW families to take a closer look at whether they have exposure to this tax—and to take action if they do.

In this article, we provide a brief overview of the U.S. estate tax, explain upcoming changes, and share key planning considerations to help you mitigate potential exposure.

What is the U.S. estate tax?

The U.S. estate tax is a federal levy imposed on the value of a person’s estate upon their death. Unlike Canada, which taxes capital gains at death, the U.S. taxes the gross fair market value of these assets, often resulting in a much higher tax bill.

The U.S. estate tax applies not only to Americans, but also to non-U.S. persons who own U.S. situs assets (i.e., assets that are physically based in the U.S.), such as:

• Real estate in the U.S.
• Shares of U.S. corporations (even if held in Canadian accounts)
• U.S. brokerage accounts
• Tangible property located in the U.S. (boats, cars, artwork)
• Interests in U.S. partnerships or funds

Current rules:

• U.S. citizens and green card holders are taxed on worldwide assets
• Non-U.S. persons (including Canadians) are taxed on U.S. situs assets only

Exemptions:

• Americans: US$15 million per person, or US$30 million per married couple (2026)
• Canadians: US$60,000 on U.S. assets + partial relief under the Canada‒U.S. Tax Treaty via a pro-rated unified credit

The treaty helps, but it doesn’t eliminate exposure for Canadian families with large U.S. holdings. Graduated tax rates range from 18% to 40% on taxable U.S. assets. Moreover, the top tax rate of 40% applies on any taxable U.S. assets above the US$1 million threshold, making this tax highly punitive.

Formula for Canadian estates (2025 tax year):

U.S. Estate Tax Payable = (U.S. Situs Assets x Graduated Tax Rates) – Unified Credit

Where:

Unified Credit = $5,541,800 x (U.S. Situs Assets ÷ Worldwide Estate)

What’s changed in 2026

The U.S. estate tax exemption has shifted significantly over time. Before 2018, the exemption was approximately US$5 million, indexed for inflation. In 2018, it temporarily doubled to US$10 million, and the exemption has increased annually in subsequent years. Without legislative action, it would have reverted to roughly US$7 million on January 1, 2026.

However, the One Big Beautiful Bill Act, signed into law on July 4, 2025, introduced key updates:

• The exemption increased to US$15 million per person (US$30 million for couples) starting in 2026 (While this change is labelled “permanent,” future legislation could change this.)
• Indexed for inflation beginning in 2027

This also raises the maximum unified credit under the Canada‒U.S. Tax Treaty, from US$5,541,800 in 2025 to US$5,945,800 in 2026. Canadians only receive a pro-rated share based on the proportion of U.S. assets in their worldwide estates.

Example:

Let’s say that sometime in 2025, you had a C$50 million estate with 50% U.S. assets (worth US$37.5 million, with US$18.75 million in U.S. assets). It would qualify for a US$2.97 million unified credit. After applying this credit, the estimated U.S. estate tax liability payable would be US$4.47 million (or roughly C$5.96 million). Of course, as currency exchange rates fluctuate, today’s figures may be different.

This hypothetical example illustrates that even with higher exemptions and treaty relief, exposure can still be substantial for Canadian UHNW families with significant U.S. holdings, making proactive planning essential.

Three ways to potentially reduce exposure:

To mitigate this exposure, there are planning strategies that can help reduce or eliminate exposure to U.S. estate tax for Canadians. These strategies should be considered in consultation with cross-border tax and legal advisors to ensure proper structuring and compliance. Consider:

1. Canadian holding companies—Shelter U.S. securities inside a Canadian corporation. Note that vacation properties usually don’t fit this structure.
2. Trust ownership—Use trusts to own U.S. real estate or securities to avoid direct ownership.
3. Indirect investment vehicles—Canadian mutual funds or ETFs investing in U.S. markets are generally not subject to U.S. estate tax.

Bottom line

Don’t assume that you are exempt from U.S. estate tax just because you’re a Canadian resident and taxpayer. U.S. estate tax rules are complex, and even modest U.S. holdings can create major liabilities. Proactive planning is essential to help reduce your U.S. estate tax obligations.

At Corient, we help UHNW families navigate these cross-border complexities with clarity and confidence. Contact us to learn how we can help you prepare for the 2026 tax year and beyond.

ABOUT THE AUTHOR

CONTENT DISCLOSURE

Hypothetical examples are provided for illustrative purposes only and are not guarantees of future results. Assumptions are not predications and may not reflect actual market performance, inflation rates, tax considerations or changes in personal circumstances. Consult with a qualified professional regarding your scenario and the then-current applicable laws and rules. 

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 “Corient” is a business name that is used by Northwood Family Office Ltd. (Northwood). Northwood is registered as a portfolio manager and exempt market dealer in all Canadian provinces and territories. Northwood is a multi-family office offering integrated planning, investment management and wealth administration services to its clients. For a complete discussion of the services offered by Northwood, please request a copy of the Relationship Disclosure Information, including a copy of the privacy policy, complaints policy and code of ethics.

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CAN5205848 – February 2026