WHAT IS A US SITUS ASSET?

For most Canadian tax residents, the US estate tax regime only applies to their US situs assets. This begs the question: what is a US situs asset?

Generally, a US situs asset is property located in or having a connection to the US, including the following:

• Real property located in the US;
• Shares of US publicly traded companies (even if owned inside a Canadian RRSP);
• Shares of US private companies;
• Cash accounts with US brokerage firms;
• Tangible personal property located in the US with some degree of permanence; and
• Certain debts owing by a US debtor.

Other assets having a US connection do not qualify as US situs assets for US estate tax purposes, such as the below:

• US bank deposits not effectively connected with a business in the US;
• Canadian mutual funds holding US securities; and
• US treasury securities.

Given that US estate tax applies at graduated rates of up to 40%, it’s important that Canadians are aware of their US situs assets and estate planning tools that can eliminate or mitigate US estate tax exposure.

Please contact us for more information.