A 2026 plain-English guide to how two very different death-tax systems can reach the same estate at once.
Canada and the United States tax death very differently, and the gap between the two systems is where cross-border estates go wrong. Canada has no estate tax, but it taxes the deemed disposition of your assets when you die. The United States has no deemed disposition at death, but it does levy a federal estate tax on the value of what you leave. When your life or your assets touch both countries, both systems can reach your estate at once.
This guide covers how U.S. estate tax works, the traps that catch Canadians specifically, and the planning that keeps an estate from being taxed on both sides.
Table of Contents
Two systems, two different taxes
In Canada, there is no estate or inheritance tax. Instead, you are deemed to have sold your capital property at fair market value immediately before death, and your final return pays tax on the resulting gains, though assets passing to a surviving spouse can generally roll over tax-deferred.
In the United States, there is no deemed disposition, but there is a federal estate tax of up to 40 percent on the value of your taxable estate above an exemption. For 2026, that exemption is US$15 million per person, made permanent under recent legislation, so most U.S. citizens are well under it. The danger for cross-border families is that the generous exemption does not apply to everyone.
The $60,000 trap for Canadians
Here is the trap that surprises people. A Canadian who is not a U.S. citizen or U.S. domiciliary, but who owns U.S.-situated assets, gets a U.S. estate tax exemption of only US$60,000, not the US$15 million figure. U.S.-situated assets include U.S. real estate and, importantly, shares of U.S. corporations, even when held in a Canadian brokerage account.
A Canadian snowbird with a Florida condo and a portfolio of U.S. stocks can therefore have real U.S. estate tax exposure, despite never having been a U.S. resident. Relief under the Canada-U.S. treaty can increase the effective exemption in many cases, but it must be claimed and planned for, not assumed.
The mixed-citizenship couple and the QDOT
The unlimited marital deduction that lets one U.S. spouse leave assets to another tax-free does not apply when the receiving spouse is not a U.S. citizen. For couples where one spouse is American and the other is not, assets left to the non-citizen spouse can be exposed to U.S. estate tax unless they pass through a special structure called a Qualified Domestic Trust, or QDOT. This is one of the most common and most missed issues in cross-border estates.
Wills across the border
A single will drafted for one country can create problems in the other, from probate delays to unintended tax outcomes. Many cross-border families are better served by carefully coordinated wills, sometimes a separate will for the assets in each country, drafted so they do not revoke or contradict each other. Beneficiary designations on registered accounts and policies must be reviewed in the same exercise, because they pass outside the will and can quietly undo the plan.
What good cross-border estate planning does
- Identifies U.S.-situated assets and measures your actual U.S. estate tax exposure, including the $60,000 trap.
- Uses the Canada-U.S. treaty and structures such as the QDOT where they apply.
- Coordinates wills and beneficiary designations across both countries so they work together.
- Aligns the plan with the Canadian deemed disposition at death so both tax systems are handled at once.
Estate decisions sit on top of everything else you own, which is why they belong inside one coordinated cross-border plan rather than in isolation.
Frequently asked questions
Does a Canadian have to pay U.S. estate tax?
Possibly. A Canadian who is not a U.S. citizen or domiciliary but owns U.S.-situated assets, such as U.S. real estate or shares of U.S. corporations, is exposed to U.S. estate tax with an exemption of only US$60,000. Treaty relief can help, but it must be planned for.
What is the U.S. estate tax exemption for 2026?
For 2026 the federal estate tax exemption is US$15 million per person, made permanent under recent legislation, with a top rate of 40 percent. This figure applies to U.S. citizens and domiciliaries, not to non-resident, non-citizen owners of U.S. assets, who receive only US$60,000.
Do I need separate wills for Canada and the U.S.?
Often it helps. A single will can cause probate and tax problems across the border, so many cross-border families use carefully coordinated wills, sometimes one per country, drafted so they do not conflict. Beneficiary designations should be reviewed at the same time.
What is a QDOT?
A Qualified Domestic Trust lets a U.S. citizen leave assets to a non-U.S.-citizen spouse while deferring U.S. estate tax that would otherwise apply, because the unlimited marital deduction does not extend to a non-citizen spouse. It is a key tool for mixed-citizenship couples.
Talk to a cross-border specialist
Cross-border estates are where small oversights become large tax bills for the people you leave behind. Sartorial Wealth can measure your exposure and coordinate the plan across both countries.
Do your assets cross the border?
We can measure your U.S. estate tax exposure and coordinate wills, beneficiaries and structures across both systems. Book a call with Sartorial Wealth, a dual-registered cross-border wealth manager: Book a call
Sartorial Wealth is a cross-border wealth management practice serving families and individuals who live, work, or invest across the Canada-U.S. border. This article is for general information only and reflects rules and figures current as of 2026. It is not tax, legal, or investment advice. Cross-border rules are complex, change over time, and depend on your specific facts and residency. Please speak with a qualified cross-border advisor before acting.
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