Tax Planning For Cross-Border Inheritances

Tax Planning For Cross-Border Inheritances

Canadian Residents Inheriting From A U.S. Estate

Special attention must be given when a Canadian resident inherits from a U.S. resident. Depending upon the way the U.S. resident sets up their estate plan, a Canadian resident beneficiary can face additional Canadian tax payable for their inheritance. This additional tax can be avoided with the proper cross-border tax and estate planning. We can help you navigate around the tax issues and implement a solution.

U.S. Residents Inheriting From A Canadian Estate

It is very common for Canadian families to have children and grandchildren who live in the U.S. When planning for the succession of wealth to such U.S. resident beneficiaries, it is crucial to have an estate plan that will minimize future Canadian and U.S. tax for these beneficiaries.

U.S. residents are subject to U.S. tax on the transfer of assets, either during their lifetime (the U.S. gift tax) or upon their death (the U.S. estate tax). However, unique tax minimization opportunities exist where such assets are properly structured to pass from a Canadian resident directly to their U.S. resident beneficiaries (or U.S. citizen beneficiaries resident in Canada). Normally, this involves the use of specially drafted Dynasty Trusts for U.S. resident children and grandchildren (and also Canadian resident U.S. citizen children and grandchildren). The Dynasty Trusts can shelter the inherited assets from U.S. estate tax for many generations, while at the same time allowing such beneficiaries access to the assets, if needed. To be effective, this planning must be done before the death of the Canadian resident.