The $15 Million Question: What the New U.S. Estate Tax Law Means for High Net Worth Canadians

 If you are a high-net-worth Canadian with a vacation property in Arizona, a U.S. brokerage account, or shares of U.S. companies held inside your RRSP — the U.S. federal estate tax is not a theoretical concern. It is a real exposure that demands real planning.

And in 2026, the rules changed significantly in your favour — but only if you understand the new landscape and act accordingly.

The One Big Beautiful Bill Act, signed into law on July 4, 2025, permanently raised the U.S. estate and gift tax exemption to $15 million USD per person, effective January 1, 2026, indexed to inflation going forward. This is a meaningful increase from the prior $13.99 million (2025) and eliminates the risk of the exemption reverting to approximately $5 million that had loomed for years.

For high-net-worth Canadians, this creates both a planning opportunity and an important recalibration exercise. Here is what you need to know.

How U.S. Estate Tax Works for Canadians

Unlike Canada, which has no formal estate tax but applies a deemed disposition (capital gains tax) at death, the United States levies an estate tax on assets transferred at death. The rules differ based on whether the deceased is a U.S. person (citizen or green card holder) or a non-U.S. person — which is the relevant category for most Canadians.

What is U.S. situs property?

As a Canadian resident who is not a U.S. citizen or green card holder, you are only subject to U.S. estate tax on your U.S. situs property — assets that the IRS considers to be located in the United States. This includes:

• US. real estate — your Arizona vacation home, your Florida condo, any U.S. rental property
• Shares of U.S. corporations held directly — even if held inside a Canadian RRSP or TFSA
• Debt obligations of U.S. persons or companies
• US. bank accounts (with certain exceptions)

Notably, Canadian mutual fund units or ETF units are NOT considered U.S. situs property, even when the fund holds U.S. securities. This creates a meaningful planning opportunity for Canadians who want U.S. equity exposure without direct U.S. situs exposure.

The 2026 threshold and the prorated credit

For 2026, U.S. estate tax applies to Canadian residents whose worldwide estate exceeds $15 million USD. But the credit available to Canadians is not the full $15 million — it is prorated based on the ratio of your U.S. situs property to your total worldwide estate.

Practical example: If your worldwide estate is $20 million USD and your U.S. situs property (a vacation home + U.S. equities) is $4 million USD, your prorated exemption is 4/20 = 20% of $15 million = $3 million. Your U.S. estate tax would apply to the $1 million excess. At a 40% rate, that is a $400,000 tax bill — on a vacation property and a brokerage account.

The Double Taxation Problem: Deemed Disposition Meets U.S. Estate Tax

Here is the scenario that keeps cross-border estate planners up at night: a high-net-worth Canadian dies owning a U.S. vacation home. Two separate tax systems take notice simultaneously.

Canada applies the deemed disposition rule — treating the property as sold at fair market value at death, triggering capital gains tax on any appreciation since purchase. The U.S. applies estate tax on the value of the property as U.S. situs. In the right circumstances, both taxes apply to the same asset.

The Canada-U.S. Tax Treaty (Article XXIX B) provides a foreign tax credit mechanism to reduce this double taxation — but it requires careful coordination, proper valuation, and proactive planning. Without it, the same asset can be taxed twice, in two countries, at death.

Five Planning Strategies for HNW Canadians With U.S. Exposure

1. Hold U.S. equities through Canadian funds, not directly

If your goal is U.S. equity exposure, consider achieving it through Canadian-domiciled mutual funds or ETFs rather than holding U.S. shares directly. Canadian fund units are not U.S. situs property. This preserves your investment exposure while removing the estate tax footprint on those holdings.

2. Structure U.S. real property through a Canadian holding company (with caution)

Some advisors recommend holding U.S. vacation property through a Canadian corporation to avoid U.S. situs classification. While this can reduce U.S. estate tax exposure, it introduces complexity: the IRS may look through the structure in certain circumstances, and there are Canadian tax implications for holding foreign property through a corporation. This strategy requires careful legal and tax advice before implementation.

3. Use the marital credit strategically

Under the Canada-U.S. Tax Treaty, an additional marital credit is available when a surviving spouse inherits U.S. property on death. The marital credit equals the lesser of the unified credit and the U.S. estate tax otherwise owing. For married HNW Canadians, this can effectively double the protection available at the first death — but the second estate may have full exposure. Planning around the second-death scenario is essential.

4. Document and appraise U.S. assets proactively

The prorated unified credit calculation requires a precise value for both your U.S. situs property and your worldwide estate at the time of death. Having current, professionally prepared valuations for U.S. real estate, private business interests, and other significant assets simplifies the estate administration process and ensures the credit is calculated correctly.

5. Coordinate wills across both jurisdictions

A Canadian will alone is insufficient to govern U.S. assets. For HNW Canadians with material U.S. property, a U.S. situs will — or a comprehensive cross-border estate plan that addresses both jurisdictions — is essential. This includes reviewing beneficiary designations on U.S. accounts and ensuring your estate documents are valid under the laws of the relevant U.S. state.

What This Means for High-Net-Worth Snowbirds

For affluent Canadians who spend extended time in Arizona, Florida, or other U.S. sunbelt states and own U.S. property, the 2026 estate tax changes are directly relevant. The $15 million worldwide threshold means many HNW snowbirds will have meaningful U.S. estate tax exposure on their vacation property — even with the higher exemption, given the prorated credit mechanism.

Additionally, the more time you spend in the U.S., the greater the risk of inadvertently triggering U.S. tax residency through the Substantial Presence Test — which would change your classification from a non-U.S. person (subject to estate tax only on U.S. situs assets) to a U.S. person (subject to estate tax on worldwide assets). This is a catastrophic planning failure for a high-net-worth individual and is entirely avoidable with proper advice.

Q: I have a vacation home in Scottsdale worth $2 million. Am I exposed to U.S. estate tax?

Potentially, yes — depending on your worldwide estate value. For 2026, U.S. estate tax applies when your worldwide estate exceeds $15 million USD and you own U.S. situs property. If your worldwide estate is under $15 million, you are likely not exposed on the Scottsdale property. If it exceeds that threshold, the estate tax applies on a prorated basis. A cross-border estate review is worthwhile for any HNW Canadian with U.S. real property.

Q: Does holding Apple or Microsoft shares in my RRSP create U.S. estate tax exposure?

Yes. Shares of U.S. corporations held directly — including inside an RRSP — are U.S. situs property for estate tax purposes. However, if you hold U.S. equity exposure through a Canadian mutual fund or ETF, those fund units are NOT U.S. situs property. This is one of the most actionable planning strategies for Canadians with significant U.S. equity holdings.

Q: Does the new $15 million exemption protect me completely?

Not necessarily. The full $15 million exemption applies to U.S. persons. For Canadians, the available credit is prorated based on the ratio of your U.S. situs assets to your total worldwide estate. A Canadian with a $30 million worldwide estate and $5 million in U.S. situs assets would have access to only 1/6 of the $15 million exemption — approximately $2.5 million. The $5 million in U.S. situs assets would face estate tax on the $2.5 million excess.