Think You’re Safe from U.S. Estate Tax? Think Again. What Canadian UHNW Families Need to Know Before 2026.

For Canadian families with ties to the United States through citizenship, property ownership, or investments, cross-border wealth and tax planning can be highly complex. Many ultra-high-net-worth (UHNW) families may not realize that their estates could be subject to U.S. estate tax, even without citizenship or significant U.S. connections.  

This exposure stems from U.S. estate tax rules, which apply to certain U.S.-based assets regardless of the owner's nationality. With notable changes announced for 2026, now is an ideal time for Canadian UHNW families to take a closer look at whether they have exposure to this tax through their estate.

This article offers a brief overview of the U.S. estate tax, explains upcoming changes, and shares key planning considerations to help you mitigate potential exposure.

What Is the U.S. Estate Tax?

The U.S. estate tax is a federal levy imposed on the value of a person’s estate upon their death. Unlike Canada, which taxes capital gains at death, the U.S. taxes the gross fair market value of these assets, often resulting in a much higher tax bill.

The U.S. estate tax applies not only to Americans but also to non-U.S. persons who own U.S. situs assets, such as:

• Real estate in the U.S.
• Shares of U.S. corporations (even if held in Canadian accounts)
• U.S. brokerage accounts
• Tangible property located in the U.S. (boats, cars, artwork)
• Interests in U.S. partnerships or funds

Current Rules:

• U.S. citizens and green card holders: Taxed on worldwide assets.
• Non-U.S. persons (including Canadians): Taxed on U.S. situs assets only.

Exemptions:

• Americans: $13.99M USD per person (2025)
• Canadians: $60K USD on U.S. assets + partial relief under the Canada-U.S. Tax Treaty via a pro-rated unified credit.

The treaty helps, but it doesn’t eliminate exposure for families with large U.S. holdings. Graduated tax rates range from 18% to 40% on taxable U.S. assets. Moreover, the top tax rate of 40% applies on any taxable U.S. assets above a $1M USD threshold, making this tax highly punitive.

Formula for Canadian estates:

Where:

What’s Changing in 2026

The U.S. estate tax exemption has shifted significantly over time. Before 2018, the exemption was approximately $5M USD, indexed for inflation. In 2018, it temporarily doubled to $10M USD, increasing annually to $13.99M USD in 2025. Without legislative action, it would have reverted to roughly $7M USD on January 1, 2026.

However, the One Big Beautiful Bill Act, signed July 4, 2025, introduced key updates:

• The exemption increased to $15M USD per person ($30M for couples) starting in 2026 (While this change is labeled “permanent,” future legislation could change this.)
• Indexed for inflation beginning in 2027

This also raises the maximum unified credit under the Canada-U.S. Tax Treaty, from $5,541,800 USD in 2025 to  $5,945,800 USD in 2026. Canadians only receive a pro-rated share based on the proportion of U.S. assets in their worldwide estate.

Example:

A $50M CAD estate with 50% U.S. assets (worth $37.5M USD, with $18.75M USD in U.S. assets) would qualify for a $2.97M USD unified credit. After applying this credit, the estimated U.S. estate tax liability payable would be $4.47M USD tax liability (≈$5.96M CAD).

This example illustrates that even with higher exemptions and treaty relief, exposure can still be substantial for Canadian UHNW families with significant U.S. holdings, making proactive planning essential.

Three Ways to Reduce Exposure

To mitigate this exposure, planning strategies can help reduce or eliminate exposure to U.S. estate tax for Canadians. These strategies should be considered in consultation with cross-border tax and legal advisors to ensure proper structuring and compliance.

1. Canadian Holding Companies

Shelter U.S. securities inside a Canadian corporation. Note that vacation properties usually don’t fit this structure.

2. Trust Ownership

Use trusts to own U.S. real estate or securities to avoid direct ownership.

3. Indirect Investment Vehicles

Canadian mutual funds or ETFs investing in U.S. markets are generally safe from U.S. estate tax.

Bottom Line

Don’t assume you are exempt from U.S. estate tax as a Canadian resident and taxpayer. U.S. estate tax rules are complex, and even modest U.S. holdings can create big liabilities. Proactive planning is essential.

At Northwood Family Office, we help UHNW families navigate these cross-border complexities with clarity and confidence. Contact us to learn how we can help you prepare for 2026 and beyond.