We urge everyone to pay close attention to U.S. Estate tax matters considering pending changes effective January 1, 2011. Although repealed for 2010, we understand that new Estate tax rules will be introduced with application to both U.S. citizens and to foreign individuals who own real estate situated in the U.S. Immediate consideration should be given to existing or proposed ownership structures for U.S. real estate as soon as the new U.S. rules are announced.
Prior to 2010, Federal U.S. tax rates ranged from 18% to 45% of the property fair market value at death. Further, please note that U.S. Estate tax is in addition to any capital gains taxes that might apply and represent a Succession tax that does not exist in Canada. Although certain exemption criteria did previously exist for Canadians pursuant to the U.S.-Canada tax treaty, the exemption calculation is complex and involves consideration of both U.S. assets and worldwide assets.
Planning solutions are available; however require careful consideration of U.S. and Canadian tax laws, provisions under the U.S.-Canada tax treaty, Will planning and the specific facts of each individual situation. Examples of possible planning solutions include the use of a qualifying trust, multiple family ownership as ‘tenants-in-common’ in conjunction with an appropriate funding structure and Will planning, establishment of a non-recourse mortgage and the use of life insurance.
Professional advice with respect to any planning actions will be both appropriate and necessary. If we can be of assistance at SB Partners, please contact us.