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Canadian families are more global than ever, and this trend will only continue. Children and other family members increasingly work in other countries, sometimes staying after post-secondary education at a foreign college or university, forming relationships, including marriage, having children, and settling in their new home jurisdiction. Others emigrate to Canada, leaving relatives and friends in their country of origin.
Foreign jurisdictions, however, usually have very different tax regimes for taxing on death than Canada. We are unique among the few countries with a capital gains regime, which has been in place since January 1, 1972, when succession duties were abolished at the federal level and replaced by taxation of capital gains on death. On death, there is a “deemed disposition” of capital property at fair market value. The estate of the deceased person pays income tax on any capital gains, subject to certain exceptions and exemptions.
Most high-tax jurisdictions have an estate or inheritance tax. An estate tax taxes the value of assets owned at death and is paid from the estate. An inheritance tax is paid by the beneficiary on the value of what they inherit.
Most Canadians would not be familiar with these tax regimes, in particular inheritance taxes, how different they are, and the impact they can have on their estate planning if they have foreign beneficiaries.
A few examples of death taxes in several jurisdictions will illustrate the issues. Most EU countries have an inheritance tax where the beneficiary who receives the inheritance pays the tax.
Many countries have an estate tax, which taxes assets owned at death. For example, the United States has an estate tax at the federal level, as do several states, and some states have an additional inheritance tax. At the federal level, there is an exemption of $15M USD, so few estates pay any tax.
The United Kingdom also has an estate tax [although it is called inheritance tax (“IHT”)]. IHT is charged at 40% on the value of an estate above the nil-rate band, which is currently 325,000 Sterling, subject to certain exemptions and reliefs.
It is important in planning the gifts under your will to understand how a foreign beneficiary may be taxed. For example, a cash gift of $250,000 to a friend who resides in France and is subject to French inheritance tax might be taxed at approximately 60%.
Or if you have children living in a jurisdiction that has an inheritance tax, although there may be a larger exemption than applies to a non-relative, it may be insignificant when compared to the size of the overall gift.
It is important to seek advice in each jurisdiction regarding any tax minimization strategies that may be available and to have a clear understanding of how the foreign beneficiary will be taxed.
Another consideration is that most Canadian wills contain a “debts and death taxes” provision that provides for all death taxes to be paid by the estate, so the beneficiaries receive the same amount notwithstanding local taxation. In particular, where a beneficiary may pay inheritance tax at a high rate, this may produce an unintended result and give rise to disgruntled beneficiaries who are not subject to inheritance tax indirectly bearing a portion of their sibling’s foreign inheritance tax.
As an example, if a child lives in Ireland or France or another country with an inheritance tax and your other children live in Canada, which has no inheritance tax, should your estate bear the burden of the inheritance tax or should your child? You should, of course, get advice from an Irish or French estate lawyer on this issue in planning your will.
There is much disharmony when planning an estate that has foreign beneficiaries. No doubt, with globalization comes more complexity. Legal and tax regimes are often very different.
As well, Canada only has two tax treaties that may offer relief from possible double taxation on death – the U.S. and France.
The first step is awareness and identification of the issue with professional assistance and then dealing with it with effectively.
Margaret O’Sullivan is Managing Partner of the Toronto-based trusts and estates law firm O’Sullivan Estate Lawyers. She practices exclusively in the areas of estate planning, estate litigation, advising executors, trustees and beneficiaries, and administration of trusts and estates. This article originally appeared in the O’Sullivan Estate Lawyers blog. Used with permission.
Notes and Disclaimer
Content © 2026 by O’Sullivan Estate Lawyers LLP. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.
The foregoing is for general information purposes only and is the opinion of the writer. It is not intended to provide specific personalized advice on any individual situation, including, without limitation, investment, financial, legal, accounting or tax advice. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate to your particular circumstances.
Image: iStock.com/Sean_Kuma
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