It’s Your Money > Taxes

Estate Tax

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     Although the exemption for US persons increased to 10 million dollars under the new US tax bill, the exemption for non-US remained at $60,000.

Suzokig, the link you left for TRAIN was very useful indeed. They allow 10 million pesos on a house now and as you said a 5 million allowance on everything else. So I'm very happy with that, or as happy as anyone can be paying taxes haha.

When Tina and I were setting up our property/house ownership and how we wanted it organized we met with her good friend and local lawyer.  Him and I talked a lot also and have done a few things together.

The way he sorta simplified it is every law that can be used by any government department to help them, and hurt you, is what you should expect.  It doesn't always happen, but we should plan for it.  He then said that pretty much every property can be seen as 2 things. The land(property) as one unit and the building(house) as another unit and the local law can see it that way anytime they want pretty much.  He said it is not like the USA where squatting is something that is done, but the people who own the land have to go through a lot of legal proceedings to get it set up.  I actually know of people who did this in Arkansas so I understood what he was talking about. 

So he told me that no matter what, the land will always be in Tina's name.  That I can set things up that if she dies before me I have some form of ownership, but that is limited both in the amount of time I can can have it and what I can do with it.  Then he brought up the tax issues she would go through if I died and my name was on the building. 

Tina and I are the same age, and I have diabetes while she is much healthier.  So I went through making sure everything was in her name and my name at no time is mixed up with it in anyway.  So when my time comes, everything is made easier for Tina.  He also talked about me setting up some form of trust for my financial accounts to go into that upon my death she would inherit it in payments over time evenly distributed.  That would save her trouble.  I am not sure how that works as I have not done it yet and will talk to my cousin who's a lawyer in the US some about it first as it would all happen on that side and what the good and bad of it is.  That seems to be something that might work on this side of the pacific....but I see some issues in the USA with setting that up. 


--- Quote from: suzukig1 on February 13, 2018, 10:30:42 AM ---For the U.S. only: There are several "unusual" issues with estate taxes and retirement accounts.

3. If the "surviving" spouse is not a U.S. citizen and not a U.S. resident and dies with assets in the U.S. huge estate taxes may be owed.  There is only a $60,000 deductible for non U.S. citizen, non U.S. residents on estate taxes.  The U.S. estate tax rate is high; something like 40% - 50%.  (U.S. citizens and U.S. residents get a $5M+ deductible on estate taxes.)

--- End quote ---

The operative word in the above quote is may.  In many cases the threat of crushing U.S. estate taxes is more illusory than real.  In many cases, there is a treaty that mitigates.  For example, for Canadians, the situation (as described in a January 2018 tax bulletin) works thus:

If your US assets are $60,000 or less
If the value of your US assets are $60,000 or less, you are not subject to US estate tax and your estate does not need to file a US estate tax return.

If your US assets exceed $60,000 and your worldwide estate exceeds $11.2 million

If the value of your worldwide assets exceeds $11.2 million, you may be required to pay US estate tax based on the value of your US assets. The tax rate starts at 18% and increases to 40% for US assets exceeding $1 million.

Fortunately, Canada’s tax treaty with the United States provides some relief for Canadians. It allows you to reduce your estate tax liability by claiming a tax credit equal to the greater of:
•   $13,000
•   $4,425,8002 x the value of your US assets ÷ value of your worldwide assets

For example, if your US stock portfolio accounts for 10% of the value of your worldwide assets, you will be entitled to a credit of $442,580 ($4,425,800 x 10%).

US estate tax rates and credits
The credits

For example, David, a Canadian resident (who is not a US citizen), owns a US stock portfolio worth $1.5 million. His entire estate is valued at $15 million.

As shown below, if David dies in 2018, his estate can claim a unified credit equal to $442,580 (10% of $4,425,800), reducing his estate tax liability to $103,220.

What if David dies in 2018?

US estate tax before credits


Less: Unified credit


US estate tax liability before marital credit


Less: Marital credit


US estate tax liability after unified and marital credits


In addition to the unified credit, the tax treaty provides a marital credit if the US assets pass to a spouse on death. The marital credit equals the lesser of the unified credit and the amount of the estate tax.

If David were to leave the US stock portfolio to his wife Kylie, also a Canadian resident (who is not a US citizen), his US estate tax liability would be completely eliminated.

As a Canadian, owning U.S. real estate I intend to leave to my wife (also a Canadian citizen, who came here from the Phils with me in 2002), I pay considerable attention to and keep up to date on this stuff.  I am working diligently to keep my worldwide assets under the $11.2 million threshold.  It's a struggle, but I think I can do it. :D


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