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U.S. Estate Tax Can Burden Your Estate
If you hold U.S. assets and if your world estate is valued at more than US$2,000,000, U.S. estate taxes can impose a very serious burden on your estate.
You Should Also Keep In Mind...
U.S. securities held in RRSPs/RRIFs are subject to U.S. Estate Tax upon the death of the annuitant since the U.S. tax authorities appear to "look through" RRSPs/RRIFs to the underlying assets on the basis that RRSPs/RRIFs simply represent deposit accounts or perhaps revocable trusts. The annuitant of an RRSP/RRIF may not be entitled to treaty relief and thus may be exposed to double taxation (i.e. any income inclusion will be taxed in Canada and exposed to Estate Tax in the U.S. with no foreign tax credit relief).
Maintaining a brokerage account in Canada to hold U.S. securities will not avoid exposure to U.S. Estate Tax. (It doesn't matter where the U.S. securities are held and as a result, U.S. securities held in Canada are still subject to U.S. Estate Tax upon the death of the shareholder.)
If your estate is subject to U.S. Estate Taxes, there may be planning strategies available to assist you in reducing your U.S. Estate Tax exposure. For example, using non-recourse mortgages on U.S. real estate. (Non-recourse mortgages stipulate that the lender has recourse only to the mortgaged property, and not to the mortgagor personally, in the event of default.)
The most effective solution may very well be to simply sell your U.S. assets to other family members or to third parties prior to death. To help ensure the completion of such sale transactions, it is desirable for others to hold Powers of Attorney, effective in the relevant U.S. jurisdictions, in the event you are incapable of following through on your own.
The effectiveness of these measures is not clear in law and under no circumstances should action be taken without careful consideration and consultation with experts.
There are significant risks and potentially adverse income-tax consequences in both Canada and the United States if these strategies are improperly or inappropriately used.
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