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Discussion Starter #1
US estate tax could come back with sharp bite in 2011, writes US lawyer Deborah Jacobs in Forbes 20 apr/10

http://finance.yahoo.com/focus-retirement/article/109340/estate-tax-could-come-back-with-sharp-bite?mod=fidelity-managingwealth

looming US 2011 legislation will set the estate tax threshold at $1 million unless US lawmakers enact new laws. So far they're doing nothing.

a common mistake by canadian financial journalists & bloggers is to claim that the full US exemption for stateside US taxpayers will apply to canadians. Instead, what will apply to non-resident alien estates with US assets is a pro-rated portion of the $1 million exemption. The pro-rata will be the percentage of US assets in a deceased's global estate. US calculations include proceeds of life insurance policies in the global estate tally.
 

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a common mistake by canadian financial journalists & bloggers is to claim that the full US exemption for stateside US taxpayers will apply to canadians. Instead, what will apply to non-resident alien estates with US assets is a pro-rated portion of the $1 million exemption. The pro-rata will be the percentage of US assets in a deceased's global estate. US calculations include proceeds of life insurance policies in the global estate tally.
I'm one of the bloggers with an incorrect understanding of US estate laws. Thanks to you, I've corrected my mistake and revised my post:

http://www.canadiancapitalist.com/should-us-estate-taxes-affect-the-choice-of-investments/

I'm republishing it tomorrow because I feel this is an important (and overlooked) issue for Canadian investors.
 

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Discussion Starter #4
in mid-april the taxation and real property sections of the american bar association requested a Congressional finance committee hearing into proposed changes in US wealth transfer tax, also known as estate tax.

of the 31 bills on estate tax reform currently before congress, a third or more represent the interests of farmers, who are often described as land rich but cash poor. In particular, special exemptions are being proposed for small family farms. Although republicans tend to predominantly support & sponsor high exemption bills, democrat congressmen and senators are also among such supporters.

not that you'd guess from the big yawn on this forum, but middle-class canadian estates with even a small US asset are at risk. The looming $1 million exemption if the US fails to enact new legislation by the end of this year does not mean $1 million in US assets, despite media mistakes on this point. It means $1 million in global assets of every non-resident alien estate that contains any amount, howsoever small, of a US asset. From the IRS point of view, estate global assets will include principal residence wheresoever situated, all life insurance policies, all other assets whether moveable or immoveable wheresoever situated, and probably a canadian rrsp. With real estate prices as high as they are in canada, it will be a commonplace for the estate of a canadian testator to exceed the $1 million watermark, according to washington.

it would be relatively easy for washington to set up platforms to identify and capture a stream of foreign estate tax. How ? Ah, a post for another day.

in the meantime responsible US financial advisors are growing increasingly concerned because they cannot offer any advice to their estate-planning clients.
 

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Bumping up this old thread because with the fiscal cliff looming, US Estate Tax exemption will revert to $1 million in 2012 and the tax rate will hit 55%.

http://money.usnews.com/money/blogs/the-best-life/2012/10/03/estate-tax-changes-would-affect-more-than-the-super-rich

It's hardly the fiscal cliff, but estate taxes are set to face their own day of reckoning next year. The current rules allow estates of up to $5.12 million to avoid all estate taxes, and that level can be effectively doubled for a couple. Large estates that do face taxes must pay a levy of 35 percent, which is low by estate-tax standards. Gift taxes have also been relaxed.
 

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That would be 2013 CC. Also what about Canadian snowbirds who are considered resident aliens? I think the exemption is much lower. It is only a problem if you hold real property or lots of US Securities.
 

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Hi:

I was hoping to bump this thread given the most recent developments with the "fiscal cliff" deal reached earlier this week. I found the following article on about.com which touches on it: http://wills.about.com/od/understandingestatetaxes/a/estatetaxchart.htm

The article looks at it from the perspective of american citizens/residents, but (correct me if I'm wrong) I assume that the $5.2M exemption amount applies to Canadians at the previously quoted prorated amount (i.e. US assets / Whole world assets x exemption amount = Prorated exemption amount).

So if I take a simple example of a Canadian citizen and resident with an investment portfolio of $1M of which 50% is in US based ETFs (e.g. VTI, VEA, VWO) and an overall estate value (world wide... including the investments in the US) of $2M, am I correct in thinking that with a quarter of overall assets in the US that this Canadian would qualify for a:
- $5.25M (2013 exemption amount) x 500K / 2M = $1,312,500
exemption of US holdings?

Given that s/he holds only $500K of US assets... no estate tax? Or am I totally out to lunch?

And what happens post 2013?

Pab
 

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This may be simplistic, but as I understand it, the US Estate Tax exemption amount was settled at US $5.2 million, as of Jan 1 2013.

If I understand correctly, unless you have total worldwide assets of over this amount, you need not worry, as US estate taxes will not effect you.

It would be great if another poster could verify this.

On a personal note, I must say that it is ludicrous that a Canadian citizen should have to worry about the US government asking for Estate Taxes, just because you may want to invest in US stocks, or buy a vacation home down south.
Just like every gov't, they are like heroin addicts, always searching for their next hit.
 

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Sorry to say that the rules for resident aliens (e.g. snowbirds) are different. And it changes but never is as good as for US citizens. I knew the differences back when I decided to invest in Mexico (2007) and they were onerous and required the use of accountants to set up trusts. At that time, all US assets over $60K were subect to 50% tax if you died. That includes a transfer to your spouse.

I believe the rules have changed now and it might be better but not by much. The good news is that you can buy a mobile home in the US for $35k so many of the rules will not capture you in the net (near Palm Desert CA). The problem that I had was that DW did not want a mobile home away from town or the sea with no view.

Consult an knowledgable cross-border tax accountant. It will be worth every penny because so many people will give you useless obsolete or just incorrect information. I found that in 2007. Never believe anything that any realtor says for any property here, there and everywhere! Snowbirds will quote what they are told by realtors who have no idea about tax treaties and rules for resident aliens.

(This includes Patricia Lovett-Reid when she and her DH bought a condo in Florida a couple of years ago when she was the investment expert at TD. They have both learned a lot after the fact!)
 
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