Canada's Approach to "Estate Taxes"

Over the years I have been witness to numerous harangues over our “flawed” US Tax Code. I even had one client threaten to renounce their US citizenship and move to Canada. (As a side note, renouncing US citizenship and transferring assets abroad has its own sophisticated tax implications.) The threat of casting off one’s allegiance to the US got me interested to see if Canada did indeed have a better tax structure. On first glance if you like hockey, snow and no “Death Taxes” Canada seems like a great place to call home. But before you book your one way ticket north, we have to look at their taxes a bit closer. While Canada doesn’t have “Death Taxes”, they do happen to have lots of taxes on the transfer of assets that just so happen to occur at your death. These taxes are not officially death taxes because Canada taxes the TRANSFER of assets not the death of the owner. The tax is applied to the asset fair market value just prior to death. In many cases this results in capital gains and full taxation of retirement accounts in the year of death. Real estate transfer taxes also apply, but certain scenarios like transferring fishing property to children are tax exempt. Just like in the United States, tax mitigation strategies exist; it’s just a matter of understanding and utilizing them. Try as you may, taxes are still likely to be a part of whatever country you want to call home.


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