Feigenbaum Law

The Republican Plan to Eliminate Estate Tax: What Does It Mean for Canadians?

Personal Tax Planning
November 10, 2017

Last week, we blogged about the introduction of the Tax Cuts and Jobs Act (the Act) by the House Republicans and outlined some key changes that may be pending to both corporate and personal income tax in the U.S.

One of the major proposed changes that would affect personal tax planning would be the elimination of the estate tax. Clearly, this may result in significant changes for U.S. residents, but what is the potential impact of this proposed change on Canadians?

The Elimination of the Estate Tax

As discussed last week, the Act seeks to double the estate, generation-skipping, and gift tax exemptions to $11.2 million for individuals and $22.4 million for married couples. It also seeks to phase out both the estate and generation-skipping taxes within six years.

The Impact of this Elimination on Canadians

Canadian residents may be able to benefit from changes to estate tax in the U.S. by virtue of the cross-border tax-treaty the two countries share.

The U.S. estate tax affects Canadians who are dual U.S. citizens as well as Canadians who own U.S. situs property (including both real estate as well as U.S. securities). As such, any eventual repeal of estate tax would have a significant impact on these affected Canadians. Once any repeal occurs, Canadians may be able to avoid some of the complex and technical estate and tax planning they must currently undertake in order to minimize the impact of U.S taxes on their estate.

While it remains to be seen what will happen as the proposed Act makes its way through government, it is likely that Canadians with assets in the U.S. will have to continue to comply with disclosure and filing requirements, regardless of any potential future change or repeal of estate taxes.

At the moment, it is difficult to predict what exact impact the pending U.S tax reforms will have on dual citizens and other affected Canadians, but it is safe to say there will be an impact. We will continue to monitor developments as this Act moves through the Senate and the House, and will provide our insights on any changes as more information becomes available.

In the meantime, if you are thinking proactively about your tax plan in the wake of the recently announced tax reforms, contact Feigenbaum Law. We offer custom solutions to personal and corporate tax planning. Our in-depth knowledge of U.S. and Canadian tax makes us leaders in our field. We offer services to clients in the U.S., Canada, and around the globe. Contact us online or at (905) 695-1269 or toll-free at (877) 275-4792 to learn about how we can help you with complex, cross-border tax planning.

Tagged: Canadians, dual citizens, estate tax, situs property