Did you know that Canadians must file a U.S. tax return if they own something of value over $60,000 USD upon their death? Whether you are a snowbird who owns a home, an investor with U.S. Stock, or have a boat permanently situated in the U.S. that you plan to bequeath to a loved one, your estate will have to file a U.S. Tax return. regardless of whether an estate tax liability exists.
Some examples of U.S. situs property:
- Real Estate
- Bonds and Other Debt Obligations
- Deferred Compensation for Employees
- Retirement Plans
- Publicly Traded Shares
- Stock Options
- Property: Vehicles, Art, Jewellery
- Safety Deposit Box Located in U.S.
While filing the tax return on property over $60,000 USD is necessary, it does not necessarily mean a tax liability. Here is a quick test to assess whether you have tax exposure:
|Fair Market Value of U.S. Property in Excess of:||$60,000 USD|
|Value of Worldwide Estate in Excess of:||$11.4 Million USD|
If your estate meets both conditions, it will be taxed on a graduated tax rate system, based on the value of your taxable estate.
Problems can arise for the heirs of your estate if the U.S. estate tax return is not filed. Heirs will have no basis in the U.S. situs property, making it especially difficult for them to sell their newly inherited property.
Penalties may also be imposed by the IRS for both late filing and late payment. These penalties are a red flag for many transfer agents, and they may not agree to transfer the property without proof of clearance from IRS.
Estate planning should be reviewed on an ongoing basis in order to keep up to date with changing laws. Your estate plan needs to flexible enough to allow for necessary changes to be made in relation to these shifting circumstances.