I am Canadian and own a US condo — will my estate owe US estate tax?
It is exposed to the regime, which is not the same as owing tax. US real property is a US-situs asset whoever holds it, so the test is met by the property itself. What then matters is the value of your US-situs assets, the much smaller amount that passes free of US estate tax for a non-resident compared with a US person, and the treaty relief that closes part of that gap. A Canadian who has never lived in the United States can still be inside these rules.
Do US shares held in my Canadian brokerage account count?
The account's location is not the test. Shares in US corporations are US-situs assets wherever they are held and whoever holds them, so US-listed holdings in a Canadian account can form part of the exposed estate. This surprises people who assume the custodian decides the answer. The practical step is an inventory: go through the holdings and separate what is US-situs from what is not, because the exposure is measured against that sub-total rather than against the whole portfolio.
I have never lived in the United States — why does US estate tax apply?
Because the test is where the assets are, not where the owner was. Residence, citizenship and time spent in the country do not enter into it for these purposes. If the estate includes US real property or shares in US corporations, those assets are within the regime, and the fact that the deceased never set foot in the United States changes nothing about their situs. Residence does matter for how much passes free of tax and for treaty relief, but not for whether the rules reach you at all.
Does the Canada–US treaty remove US estate tax for Canadians?
It softens the position rather than removing it. The amount that passes free of US estate tax for a non-resident is far smaller than for a US person, and the treaty is what closes part of that gap. Relief is proportionate to the exposure rather than a flat exemption, so the ratio of US-situs assets to the worldwide estate is the figure to understand and, where possible, to manage. Treating the treaty as an answer rather than as partial relief is how estates arrive unprepared.
Will holding the US property through a company solve the problem?
Not if that company is a US corporation. Shares in US corporations are themselves US-situs assets, so this exchanges one exposed asset for another and adds a layer of filing. Holding structures are sometimes useful for other reasons, and they change who holds title, the income tax treatment and the administration on death. But the situs question has to be answered for whatever the estate ends up owning. Ask what the estate will hold, then ask where that asset is situated.
Who actually pays US estate tax, my estate or my beneficiaries?
The charge falls on the estate, and in practice it is the executor who has to establish the position, file and settle it before assets are distributed. That has two consequences worth planning for. The first is liquidity: if the US-situs asset is real property, there may be nothing cash-like in the estate to pay from. The second is timing, because a distribution made before the position is settled leaves the executor personally exposed to an obligation they can no longer fund.
What does "received a distribution from a foreign trust" mean on my return?
It is asking whether the trust conferred anything on you during the year — cash, property, or the use of trust property, including rent-free occupation of a house and, in some circumstances, a loan. Answering yes brings an information return, and where the distribution includes income accumulated in earlier years the tax computation can carry an interest charge for the delay. Trust accounts showing the composition of the distribution are what keep that computation from defaulting against you. See Form 3520.
How do I report the sale of a foreign property?
On your residence-country return, as a disposition, with proceeds and cost base converted at the rates for their own dates. Separately, the country where the property sits may require its own return and may hold back tax at closing until a clearance or certificate is issued — Canada does this for a non-resident vendor, and the United States withholds on a foreign seller of US real property. Those steps have their own deadlines, often before closing. See clearance certificates on a property sale.
