A Canadian individual who is transferred to the United States may be exposed to US estate, gift or generation-skipping transfer tax (collectively, transfer taxes). The exposure depends on whether the individual is regarded for transfer tax purposes as a US resident or a non-resident alien. Criteria for determining residency for US transfer taxes differ from those for determining residency for US income taxes.
Key aspects of transfer taxes are discussed below and summarized in Table 1 on page 3. All dollar amounts are in US currency.
An individual will be considered a US resident for transfer tax purposes if he or she is domiciled in the United States. A person acquires domicile in the United States by both:
Domicile is a subjective test because it depends on an individual’s intent to remain in the United States. Courts and commentators have developed some objective criteria to help determine whether the intent necessary to establish domicile is present. These criteria include: