Tax Insights – Estate tax update: Canadians living in the United States

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Issue 2014-12

Canadians who live in the United States may be regarded as US residents for US estate and gift tax purposes and taxed in the same manner as US citizens.

For US estate and gift tax purposes – unlike for income tax purposes – a resident is a person who is domiciled in the United States. A person acquires domicile by both:

  • being physically present in the United States, however briefly
  • forming the intent to reside in the United States permanently

Canadians who are domiciled in the United States will be liable for gift tax on the transfer of property during their lifetimes and are subject to US estate tax on the value of their worldwide assets owned at the time of death.

Those who are not domiciled in the United States will be subject to US estate and gift tax on only certain US assets. Our Tax insights ‘Estate tax update: US estate tax exposure for Canadians’ provides details on how Canadian residents (who are not US citizens) may be subject to US estate tax if they die owning certain US assets.

Both physical presence and intent to remain in the United States are required for domicile. Physical presence without the intention of remaining indefinitely does not constitute domicile on its own.

Therefore, Canadian individuals who live and own assets in the United States will not be domiciled in the United States for estate tax purposes unless they intend to remain there permanently. However, even if they retain certain ties to Canada, if their behaviour indicates intent to remain permanently in the United States, they will be regarded as domiciled there for estate and gift tax purposes.

For example, an individual with certain ties to Canada who is in the United States on a non-immigrant visa that can be renewed annually and indefinitely can develop the subjective intent to remain in the United States permanently and therefore establish domicile.