US Estate Tax for Canadian Nonresidents: Form 706-NA and the $60,000 Threshold

The $60,000 Trigger

When a Canadian citizen who was not a US resident dies owning US-situated assets, the IRS treats them as a nonresident non-citizen (NRNC) for estate tax purposes. If the total value of those US-situated assets exceeds $60,000 USD, the financial custodian holding those assets is legally prohibited from releasing them to the executor without an IRS Federal Transfer Certificate — Form 5173.

US-situated assets include stocks in US corporations (even those held in a Canadian brokerage account), US real estate, US-based bank accounts and investment accounts, and tangible personal property located in the US at the time of death.

This is where most Canadian families get blindsided. A snowbird who owned a Florida condo, held some US dividend stocks in their RRSP, and had a US bank account for winter expenses can easily exceed $60,000 without realizing these assets create a US tax obligation.

How the Tax Works

The US estate tax for nonresidents uses a different regime than for US citizens. The key differences:

The $60,000 figure is a filing and transfer threshold, not the treaty-adjusted exemption. The Canada-US Tax Treaty provides a prorated credit based on worldwide assets. In 2026, the maximum US estate-tax exemption is $15 million, subject to the treaty calculation for a Canadian resident.

Tax rate is graduated — starting at 18% on the first $10,000 above the exemption and climbing to 40% on amounts above $1 million. For a Canadian snowbird with a $300,000 Florida condo, the theoretical tax before treaty credits could be substantial.

The Canada-US Tax Treaty matters. Article XXIX B provides a unified credit that is prorated by the ratio of US-situated assets to worldwide assets. If US assets represent only 10% of the deceased's worldwide estate, the prorated credit often eliminates the tax entirely. But you still have to file the return to claim the credit and get the Transfer Certificate.

The Filing Sequence

The executor must file IRS Form 706-NA (United States Estate and Generation-Skipping Transfer Tax Return for Non-Resident Not a Citizen of the United States). This is not optional even if no tax is ultimately owed — the Transfer Certificate cannot be issued without the filed return.

The filing chain:

1. Identify all US-situated assets — brokerage accounts, real estate, bank accounts, tangible property. Canadian brokerage accounts holding US-listed stocks count.
2. File Form 706-NA with the IRS, including certified appraisals for real estate and account statements for financial assets.
3. Wait for IRS processing. The current timeline is 12 to 24 months. During this period, custodians subject to the transfer-certificate requirement may keep the affected US assets frozen.
4. Receive Form 5173 — the Federal Transfer Certificate — which authorizes the custodian to release the assets to the executor.

The Liquidity Trap

The 12-to-24-month processing timeline creates a severe liquidity problem for Canadian estates. The executor may need to pay immediate costs — repatriation, funeral expenses, Canadian estate administration, outstanding debts — while the US assets (potentially the largest portion of the estate) sit frozen.

Canadian banks will often pay funeral invoices directly from a frozen Canadian account with just a death certificate, but they will not release general funds without a grant of probate. If the executor needs access to the US assets to fund Canadian estate obligations, they are stuck.

Options during the wait include: drawing on Canadian liquid assets, requesting the Canadian probate court allow estate loans, or negotiating with creditors for deferred payment until the US assets are released.

What Canadian Executors Miss

The filing obligation exists even if no tax is owed. Treaty credits often eliminate the tax, but the IRS still requires the return before issuing the Transfer Certificate. Skipping the filing because "we don't think we owe tax" can leave the affected assets frozen until the filing and transfer-certificate process is complete.

Canadian RRSP/RRIF accounts holding US stocks are included. A registered account is tax-sheltered under Canadian law, but the IRS looks at the underlying assets. US-listed stocks in an RRSP are US-situated property for estate tax purposes.

Form 706-NA is separate from the Canadian tax return. The final Canadian tax return (filed with CRA) and the US estate tax return (filed with IRS) are independent obligations. Both need the death certificate. Both have their own deadlines. They do not interact directly, though the Canada-US Tax Treaty prevents double taxation by providing credits on each side.

The Complete Estate Tax Workflow

The Canadian Dies in the US — Family Emergency Guide includes the IRS filing sequence, the treaty credit calculation, and an estate tax calculator worksheet that helps executors estimate whether the $60,000 threshold applies and what the prorated credit eliminates — before spending money on a cross-border tax attorney.