The Death Tax Repeal Act and Cross-Border Estate Planning

February 23, 2017
Cottage- small wooden house on green lawn

Mark Feigenbaum

For Canadians with assets in the United States, or whose family includes dual US-Canadian citizens or US permanent residents, the repeal of the so-called “death tax” could help simplify your estate planning.

Unlike Canada, the United States has taxed an estate based on the fair market value of a decedent’s assets. Much of the support for this bill comes from farm owners and family businesses that claim to suffer unfairly under the current regime.

The Death Tax Repeal Act 2017 (Bill HR198) was reintroduced in early January, and would abolish taxes on estates, gifts and inter generational transfers. With a Republican majority in both the Senate and House of Representatives, this legislation is likely to be approved.

Is a capital gains tax going to follow?

There has been some speculation about whether a capital gains tax will be introduced to replace the repealed estate and gift tax. Without any formal statements from the Administration, it is impossible to speculate on the likelihood of this occurring, although it was part of the president’s broad proposals.

While a potential capital gains tax could still impact the taxation of Canadian estates holding US property, the tax treaty between Canada and the United States would likely provide relief from double taxation.

How could the Death Tax Repeal impact cross-border estate planning?

High-net worth American citizens living in Canada, as well as dual citizens, and anyone that owns US property or shares, should be considering their plans in light of a likely US estate tax repeal. Existing structures, such as family trusts, that have been designed to alter the ownership of U.S. assets and avoid triggering estate taxes may no longer be necessary.

Elimination of the tax would also make it much easier for Canadians to give gifts and leave assets to children residing in the US. In some cases, complicated trust structures have been devised to avoid erosion of family wealth through generations of estate taxes. Again, the legislative changes may eliminate the need for such complex planning strategies in favour of more straightforward options.

Speak to a cross-border estate specialist

At Feigenbaum Tax Law, we are recognized leaders in cross-border estate and tax planning, with a comprehensive, up-to-date understanding of the latest tax minimization options. We can help you update your estate plan to reflect the latest changes in US and Canadian laws.

Our lawyers and accountants specialize in cross-border tax planning and business services.  If you have questions about your wealth and estate planning, our team of lawyers and accountants can provide expert advice and craft a custom solution to meet your needs. Contact us online, or toll free at (877) 275-4792.

Blog

<strong>Canada Revenue Agency Denies Spousal Support Payor’s Income Tax Deduction</strong>

Family Law

Canada Revenue Agency Denies Spousal Support Payor’s Income Tax Deduction

January 25, 2023

CRA Prohibits Business Owner From Transferring Dividends to Reduce Corporate Tax Liability

Corporate Tax Law

CRA Prohibits Business Owner From Transferring Dividends to Reduce Corporate Tax Liability

December 1, 2022

Itemized Gratuities Require the Addition of HST

Business Tax

Itemized Gratuities Require the Addition of HST

November 23, 2022

Credibility Helps Court Determine Ownership and Value of Jewelry in Separation

Family Law

Credibility Helps Court Determine Ownership and Value of Jewelry in Separation

November 18, 2022

Being Left Out of a Will Is Insufficient Reason Alone to Challenge It

Estate Law

Being Left Out of a Will Is Insufficient Reason Alone to Challenge It

November 9, 2022