Do I have to declare money inherited from abroad in Canada?
The inheritance itself is a capital receipt rather than income, so there is no line on your return where the money you received is taxed. That is not the same as nothing to file. From the day the assets are yours, what they earn is your income, and the assets themselves may bring you into foreign-property reporting. If what you inherited was cash that stayed in a foreign bank account, the account is now yours and so is the interest. If it was property, the rent is yours. The receipt is silent on your return; the consequences that follow it are not.
What do I file if I inherit a house overseas?
Three things follow the house. Its value at the date of death becomes your cost for Canadian purposes, so that figure has to be established and evidenced, not estimated years later. If the house is let, the rent is reported on your Canadian return from the date you acquired it, with a credit for foreign tax paid on the same income. And the property counts towards your foreign-property reporting, which is prepared on cost rather than on what it is now worth. If it is held through a company or a trust rather than in your own name, the structure changes all three answers.
Do I need a valuation at the date of death?
You need a defensible figure, and for anything other than a quoted security that usually means a valuation. It is the cost you will subtract when the asset is eventually sold, so the gain taxed in Canada is measured from it, and a weak figure today becomes a dispute on a disposition many years from now. Get it while the estate is being administered, when local valuers, bank statements and probate papers are all still to hand. Keep the report itself and not merely the number, and keep it with the estate documents rather than in that year's tax file.
Does inherited foreign property go on the foreign property schedule?
Generally yes, once your foreign holdings pass the reporting threshold, and an inheritance can be what pushes you over it. The schedule is informational — it reports what you hold rather than taxing it — and it is prepared on cost, which for inherited assets is the value carried at the date of death. Two points catch people out. Property you occupy yourself is treated differently from property held to earn income, so what the asset is used for matters. And the obligation starts in the year you acquired it, not the year the estate is finally wound up.
What if the estate is held in a family trust abroad?
Then the structure decides the answers and the questions change entirely. What you have may not be assets at all but an interest in a trust, and a non-resident trust brings its own reporting, its own timing and its own characterisation of anything it pays out to you. Capital in some cases, income in others, with the distinction driven by the trust's terms and its own accounts rather than by what the family calls it. This is the version of the subject where guessing is expensive. The trust deed and the trust accounts come first, and the Canadian filing set is decided from them.
The money is still in the foreign bank — anything to file?
Yes, even though you have not touched it. The account is yours from the day it was distributed to you, so the interest it earns from that point is your income on your Canadian return, with a credit for any foreign tax withheld on it. The balance also counts towards your foreign-property reporting. The common error is treating the funds as still belonging to the estate because they have not been moved. The test is ownership rather than location, and a statement in your own name is usually the evidence that settles the point.
How do Canadians reduce US estate tax exposure?
The treaty does much of the work: it gives a Canadian resident a credit pro-rated by the share of the worldwide estate made up of US assets, plus a marital credit that can defer exposure on a transfer to a spouse. Beyond that the levers are the ones you would expect — the domicile of the funds you hold, whether US real property is held directly or through a structure, and life insurance to fund the liability rather than reduce it. Worldwide estate value is what the pro-ration turns on. See treaty relief on US estate tax.
Do non-residents pay US estate tax?
Yes, on US-situs assets — and with a far smaller exemption than a US citizen or domiciliary receives, which is why exposure can arise at values people assume are safe. US real property, tangible property located there and shares issued by US companies are generally in; foreign-issued securities and certain deposits generally are not. An estate tax treaty, where one exists, can improve the position considerably. See US estate tax for non-resident aliens.
