An Ontario resident who dies owning a condominium in Florida or Arizona leaves an estate that has to move through two separate legal systems at once. Real property outside Ontario is generally dealt with under the law and succession process of the jurisdiction where the land is situated, so the American property will generally require its own proceeding in the state where it sits, run by American counsel, alongside the Ontario administration. Whether it does depends on how the property was held, because survivorship and trust ownership can take it outside probate there just as they can here. On the tax side, two regimes apply to the same asset: Canada treats the owner as having disposed of it at death, and the United States imposes an estate tax on U.S.-situs property held by a non-resident. This article is about an Ontario estate reaching outward. A grant made abroad reaching into Ontario assets is the inbound problem and is dealt with separately.
What Are the Two Processes?
The Ontario administration proceeds normally, with the American property excluded from the probate value. Real estate outside Ontario is excluded from the value on which Estate Administration Tax is calculated. Our Estate Administration Tax guide sets out the inclusions and exclusions in full, and the exclusion is narrower than families expect: it covers foreign real estate, not foreign bank or investment accounts.
The American property will generally require an ancillary proceeding in the state where it is located. An Ontario certificate of appointment does not transfer American land. Local counsel opens a proceeding, typically producing an ancillary grant that gives the estate representative authority recognised in that state. Requirements, timelines and cost vary considerably from one state to another.
It is not automatic, and the first question is whether the property is a probate asset there at all. Florida ancillary administration applies to the Florida probate assets of a nonresident, so property held jointly with a right of survivorship, or held in a trust, may pass without it. Florida also provides a shorter statutory route for certain nonresident testate estates where the Florida property does not exceed US$50,000. Ask local counsel which applies first, because the answer determines the cost and timeline of the whole American side.
Sequence matters. The Ontario grant is usually needed first, because American counsel will want authenticated Ontario appointment documents before opening the ancillary file.
How Does U.S. Estate Tax Apply?
Start by confirming the deceased's status, because it decides which regime applies. Assuming the deceased was a nonresident not a U.S. citizen for U.S. estate tax purposes, meaning they were not domiciled in the United States at death, U.S. estate tax generally reaches their U.S.-situs assets only. The test is domicile rather than Canadian residence or citizenship, so a Canadian who was not a U.S. citizen but was domiciled in the United States at death is treated as a U.S. resident for estate tax purposes and files Form 706 rather than Form 706-NA. A long-term snowbird with strong American ties is exactly the person for whom that question needs asking rather than assuming.
Within that regime, U.S. real property is the clearest U.S.-situs asset, and shares of U.S. corporations are also U.S.-situs even where held in a Canadian brokerage account.
The domestic exemption is small. A non-resident who is not a U.S. citizen receives a unified credit of US$13,000, which shelters the first US$60,000 of taxable estate. Estate tax rates run from 18 percent up to 40 percent. Without treaty relief, a Canadian owning a US$500,000 condominium would face U.S. estate tax on the value above US$60,000.
The Canada-United States tax treaty is what generally prevents that outcome. Article XXIX B allows a Canadian resident's estate to claim the greater of the treaty's pro rata unified credit and the domestic unified credit available to a nonresident who is not a U.S. citizen. The proration is based on the ratio of the U.S.-situs gross estate to the worldwide gross estate, and the Internal Revenue Service treats the relief as an adjustment to the unified credit on the return rather than as a larger exemption. The treaty also carries its own conditions and information requirements.
The mechanism matters, because the shorthand version produces the wrong arithmetic. The treaty does not work by multiplying the U.S. basic exclusion amount, which is US$15,000,000 for 2026, by the U.S.-asset percentage and calling the answer an exemption. It works on the credit. For a Canadian estate whose U.S. holdings are a small fraction of a worldwide estate well below the U.S. threshold, the practical result is generally no U.S. estate tax, but the figure comes out of the credit calculation on the return.
| Domestic rule | With the treaty | |
|---|---|---|
| Relief available | A fixed unified credit of US$13,000 | The greater of the Article XXIX B pro rata credit and the domestic credit |
| Basis of proration | Not applicable | U.S.-situs gross estate divided by worldwide gross estate |
| How it is applied | Credit against tax otherwise payable | Adjustment to the unified credit on the return |
| Filing required | Where the threshold is exceeded | Yes, in order to claim the treaty position |
| Effect on most Canadian estates | Real tax exposure | Generally reduced to nil |
A separate marital credit may also be available for qualifying property passing to a surviving spouse, where the Article XXIX B conditions and election requirements are met. It is claimed on the same return.
What Has to Be Filed, and When?
Form 706-NA is the U.S. estate tax return for a non-resident who is not a U.S. citizen. The filing test is not simply the value of the American property. The executor must file where the date-of-death value of the decedent's U.S.-situated assets, together with the gift tax specific exemption and the amount of adjusted taxable gifts, exceeds US$60,000. For a person who made no relevant lifetime gifts the shorthand and the real test give the same answer, but the real test is the one to apply.
The deadline is nine months from the date of death, with an extension available on request.
Filing late has consequences, though not the ones commonly described. The Internal Revenue Service applies late-filing penalties and considers reasonable cause; it does not treat a late return as automatically forfeiting treaty relief. What a missing return does is leave the treaty position unclaimed, delay everything downstream, and expose the executor to penalties. Inherited property generally takes a date-of-death fair market value basis whether or not a return is filed, so late filing is not what determines the beneficiaries' cost base.
Do You Need a Transfer Certificate?
Frequently not, and this is where most published guidance misleads. A transfer certificate is not required for property administered by an executor or administrator appointed, qualified and acting within the United States. An ancillary administration in Florida produces exactly that, so in the ordinary snowbird case the transfer certificate route does not apply to the real estate at all.
The federal estate tax lien only exists where a return is required. Where there is a Form 706 or Form 706-NA filing requirement, the lien attaches to the gross estate and does not have to be recorded to be valid. Where there is no filing requirement, there is no lien to discharge. How the lien is cleared then depends on who is administering the property:
| Situation | Route |
|---|---|
| A 706-NA filing requirement, property administered by a U.S.-appointed representative | Apply to discharge the estate tax lien on Form 4422 |
| A 706-NA filing requirement, property not administered by a U.S.-appointed representative | Apply for a transfer certificate |
| No 706-NA filing requirement | No estate tax lien discharge is ordinarily required at all; where an Internal Revenue Service clearance letter is nevertheless needed to complete a sale, use the applicable no-return procedure |
The long processing figure belongs to a specific situation. The twelve to eighteen month estimate that circulates for transfer certificates comes from the procedure that applies where Form 706-NA was not required to be filed. It is not a universal turnaround, and quoting it as one to a client sets an expectation that may bear no relation to their file.
The transfer certificate is most likely to matter for U.S. securities and accounts, where a transfer agent or custodian is asked to transfer a nonresident decedent's property with no U.S.-appointed representative involved.
What Does Canada Do at the Same Time?
Unless a rollover or an exemption applies, the Income Tax Act generally treats the owner as having disposed of the property at fair market value immediately before death, and any resulting capital gain is brought into income at the current one-half inclusion rate. That gain is reported on the deceased's final Canadian return in Canadian dollars, so exchange rate movement between purchase and death forms part of it. A rollover to a surviving spouse or common-law partner can defer it where the statutory conditions are met, including Canadian residence for both immediately before death. Foreign tax credit relief exists where U.S. estate tax is actually paid, but it operates within its own rules and is not an automatic offset.
The principal residence exemption is available in principle for a foreign property, since the property has to be ordinarily inhabited but does not have to be in Canada. Only one property per family unit can be designated for any year after 1981, so designating the Florida condominium means those years cannot generally shelter the gain on the Canadian home. Where the deceased still owned both at death, both are deemed disposed of, so the consequence can land on the same final return.
The steps in order:
Obtain the Ontario certificate of appointment.
Retain counsel in the state where the property is located and establish whether the property is a probate asset there, and if so which procedure applies.
Value the U.S. property as at the date of death, by appraisal.
Establish the worldwide estate value, which the treaty proration requires.
Determine whether there is a Form 706-NA filing requirement, applying the full test including the gift tax specific exemption and adjusted taxable gifts.
File Form 706-NA within nine months where required, claiming the treaty position.
Where a Form 706-NA filing requirement exists, clear the estate tax lien by the route that fits: Form 4422 where a U.S.-appointed representative is administering the property, or a transfer certificate where one is not. Where no return is required there is no lien to discharge, though a purchaser or custodian may still want a clearance letter.
Report the deemed disposition on the final Canadian return and consider the rollover and the principal residence designation.
Coordinate the sale or transfer once the U.S. authority and the lien position are in place.
Our guide to whether probate is needed when there is a will explains the Ontario side, and our guide to the probate clause in a real estate transaction covers what a purchaser will require on the Ontario property.
Where This Goes Wrong
Assuming the Ontario grant transfers the American property. It does not, and a purchaser's title company in Florida will not accept it. Where the property is a Florida probate asset, an ancillary proceeding is how authority is obtained.
Assuming no tax means no filing. Where the threshold is met, the treaty position is claimed on Form 706-NA, and a return that is never filed leaves it unclaimed alongside late-filing penalties.
Concluding that foreign assets are outside the estate entirely. The exclusion from the Ontario probate value is limited to real estate outside Ontario. A U.S. bank or brokerage account is included, and U.S. shares in a Canadian brokerage account are U.S.-situs for American estate tax purposes even though the account is here.
Adding a child to title to avoid the problem. Giving a child a beneficial ownership interest can trigger an immediate deemed disposition at fair market value, and it creates trust and evidentiary problems of its own without necessarily solving the American issue.
Assuming a transfer certificate is always needed, or never needed. It is not required for property administered by an executor or administrator appointed, qualified and acting within the United States, which is what an ancillary administration produces. Where a 706-NA filing requirement exists and a U.S.-appointed representative is administering the property, the estate tax lien is cleared on Form 4422 instead. Working out which applies before quoting a timeline to beneficiaries avoids setting an expectation that is wrong by a year.
Selling before the authority is in place. A listing that produces an offer the estate cannot complete on damages its position and can expose the estate trustee.
If an Ontario estate includes property in the United States, you can book a free call to sequence the two processes before either one starts.
Frequently Asked Questions
Does a Florida condo owned by an Ontario resident need U.S. probate?
Generally yes, but not in every case. Real property outside Ontario is dealt with under the law and process of the jurisdiction where the land is situated, and Florida ancillary administration applies to the Florida probate assets of a nonresident. Property held jointly with a right of survivorship, or held in a trust, may pass outside that process. Florida also has a shorter statutory route for certain nonresident testate estates where the Florida property does not exceed US$50,000. What is clear is that an Ontario certificate of appointment does not by itself transfer American land.
Do Canadians pay U.S. estate tax on American property?
They can. Where the deceased was neither a U.S. citizen nor domiciled in the United States at death, U.S. estate tax generally reaches their U.S.-situs assets under the nonresident regime, at rates running from 18 to 40 percent. Domestic law provides a US$13,000 unified credit, enough to shelter the first US$60,000 of taxable estate. For a qualifying Canadian resident estate, Article XXIX B of the Canada-United States tax treaty provides the greater of the treaty's pro rata unified credit and the ordinary nonresident credit, subject to the treaty's conditions, which for most Canadian estates results in no U.S. estate tax being payable.
Do I have to file a U.S. estate tax return if no tax is owing?
Yes, where the threshold is met. The test is whether the date-of-death value of the U.S.-situated assets, together with the gift tax specific exemption and adjusted taxable gifts, exceeds US$60,000. The treaty relief is claimed on Form 706-NA, so a return that is never filed leaves the position unclaimed. The deadline is nine months from the date of death, with an extension available, and late filing attracts penalties, subject to the reasonable cause rules.
Is the U.S. property included in Ontario probate tax?
Real estate outside Ontario is excluded from the value on which Estate Administration Tax is calculated on an ordinary Ontario certificate. The exclusion is limited to real estate, so a U.S. bank or brokerage account belonging to the deceased is included in the Ontario estate value. Note that a different rule applies to resealings and ancillary appointments in Ontario, where only assets located in Ontario are used.
What is a transfer certificate and do I need one?
It is a document issued by the Internal Revenue Service permitting property of a nonresident decedent to be transferred without liability. It is not required for property administered by an executor or administrator appointed, qualified and acting within the United States, which is what an ancillary administration produces. Where there is a Form 706-NA filing requirement and a U.S.-appointed representative is administering the property, the route for clearing the estate tax lien is Form 4422 instead. The transfer certificate is most relevant to U.S. securities and accounts being released without a U.S.-appointed representative involved.
Can the capital gain on the U.S. property be deferred?
Where the property passes to a surviving spouse or common-law partner and the statutory conditions are met, including Canadian residence for both immediately before death, a rollover can defer the Canadian gain. The principal residence exemption can also shelter some or all of it, since a property does not have to be in Canada to qualify, though only one property per family unit can be designated for any given year, so designating the U.S. property has consequences for the Canadian home.
This article provides general information about Ontario law and is not legal advice. Speak with a lawyer about your specific circumstances.