This article is educational only. LendCity is not a tax, legal, or insurance firm. Strategies discussed involve regulated products and cross-border tax rules — coordinate with qualified professionals before acting.
You can model cash flow, appreciation, and DSCR financing down to the decimal. But many Canadian investors never ask what happens to their US rental if they die — and that blind spot can force heirs to sell property just to pay the IRS.
Dave Penyuk of Westpac Wealth Partners joined The Wisdom Lifestyle Money Show to walk through how US estate tax applies to Canadians who own American assets, and why a whole life insurance strategy built for foreign nationals can protect both the property and the people inheriting it.
Why US Estate Tax Catches Canadian Investors Off Guard
In Canada, when you sell an investment property (or are deemed to dispose at death), you generally pay tax on the gain — the increase in value since you bought it.
In the United States, estate tax for non-residents can be calculated on the full value of US situs assets at death (minus certain deductions such as mortgages or selling costs). That is a fundamentally different math problem — and it changes how you should evaluate your true return on a cross-border rental portfolio.
Foreign nationals typically receive only a small US estate tax exemption — often cited around $60,000 — compared with the much larger federal exemption available to US domiciliaries. The Canada–US tax treaty may improve outcomes when structures are set up correctly with cross-border professionals, but there is no guarantee your heirs will owe nothing.
A Simple Example: $200,000 Michigan Rental
Suppose you buy a Michigan investment property for $200,000 in cash. Five years later it is worth $250,000 and you pass away.
- US estate tax may apply to roughly $250,000 minus exemptions and deductions (not merely the $50,000 gain).
- After a
$60,000 foreign-national exemption, **$190,000** could be exposed. - At rates that can reach 40% on the top end (depending on total estate and filing circumstances), the IRS bill might land around $76,000 — in US dollars, due before your family can comfortably inherit the asset.
At the same time, Canada may treat the property as a deemed disposition, triggering Canadian capital gains tax even if the property is not sold. Your heirs could face two tax jurisdictions in a grieving season.
How a Whole Life Strategy Can Protect the Portfolio
Dave describes this not as a single “product sale” but as a holistic protection strategy for entrepreneurs, business owners, and investors with a financial tie to the United States — usually US real estate, a US business, or sizable US accounts.
For qualifying foreign nationals (Canadians included), a properly structured whole life policy through carriers such as Guardian (distributed via Westpac Wealth Partners) can provide:
- Death benefit — Tax-free proceeds to beneficiaries that can cover US estate tax so the property does not need to be sold.
- Level premiums — Base premium amounts that do not fluctuate with market swings.
- Cash value — A growing US-dollar bucket that may receive dividends from the carrier (not guaranteed, but historically paid by long-established insurers).
- Policy loans — Access cash value for repairs or emergencies without necessarily triggering income tax if structured as loans rather than withdrawals.
Coverage amounts depend on property value, appreciation expectations, hold period, and life expectancy. Dave notes investors might qualify for death benefits up to several times property value in some cases — but sizing should reflect realistic estate tax exposure, not maximum marketing limits.
The Cash Value Angle Investors Love
Because premiums are paid in US dollars, cash value accumulates in USD — useful when the Canadian dollar weakens and a $10,000 roof bill in Michigan costs more in loonies.
If cash value has grown to $15,000–$20,000, you may borrow against it (example loan rates near 4.76% were cited on the episode) while the underlying cash value potentially continues crediting at a higher rate — a form of arbitrage when the numbers align. Unpaid loans reduce the net death benefit at passing.
Who Should Consider This — and Who Should Not
This strategy tends to fit:
- Long-term holders building a US portfolio (Michigan, Ohio, Texas, etc.), not one-off flips
- Investors with multiple US properties or meaningful total US exposure
- Canadians with EINs, entities, or trusts already in place for US investing
- Families who want heirs to inherit without a fire sale to pay tax
It may not make sense if US exposure is a single small property and represents most of your net worth — the setup cost and complexity may outweigh the benefit. Dave emphasizes reviewing short-term vs long-term goals, expected hold period, and total cross-border balance sheet before proceeding.
Most LendCity investor clients already have EINs and US entities for lending purposes — those same structures can tie into insurance and estate planning conversations with your cross-border team.
Cross-border financing is only one layer of the stack. If you are buying US rentals as a Canadian, build asset protection and estate planning into your underwriting — not as an afterthought once the property closes.
Work With the Right Professionals
Dave Penyuk is affiliated with Westpac Wealth Partners (Guardian ecosystem). This episode is informational only — not legal, tax, or personalized financial advice. You need:
- A cross-border CPA for treaty elections, filings, and Canadian deemed disposition
- US estate tax counsel for Form 706-NA and situs planning
- A licensed insurance/financial advisor for policy design and suitability
Contact: WestpacWealth.com · Las Vegas office · LinkedIn: Dave Penyuk
Frequently Asked Questions
Do Canadians have to pay US estate tax on US rental property?
Is US estate tax calculated on gains or full property value?
Can whole life insurance pay US estate tax for Canadian investors?
Do I need a US Social Security number to get coverage?
Does this replace cross-border tax planning?
When should I set this up relative to buying US property?
Disclaimer: LendCity Mortgages is a licensed mortgage brokerage. Content on this page is for educational purposes only and does not constitute legal, tax, investment, securities, or financial-planning advice. Rates, premiums, program terms, and regulations referenced are as of the page's last updated date and are subject to change. Any investment returns, rental yields, tax savings, or case-study figures shown are illustrative only — they are not guaranteed, not typical, and individual results will vary. Consult a licensed lawyer, Chartered Professional Accountant, or registered dealer before acting on any information above. Editorial standards.
Written by
LendCity
Published
June 29, 2026
Reading time
6 min read
Estate Tax
Estate tax refers to a tax levied on the total value of a deceased person's assets, including real estate holdings, before distribution to beneficiaries. It is worth noting that Canada does not have a formal estate tax; instead, a deemed disposition at death triggers capital gains tax on appreciated real estate investments, which achieves a similar outcome.
Foreign National
A foreign national is a non-Canadian citizen or permanent resident who seeks to purchase real estate in Canada. The federal Prohibition on the Purchase of Residential Property by Non-Canadians Act restricts most residential purchases by non-Canadians and is currently in effect until January 1, 2027 — narrow exceptions apply, and the end date can change by regulation. Where a purchase is permitted, foreign nationals typically face higher down-payment requirements, additional lender scrutiny on proof of income and funds, and may be subject to provincial foreign-buyer taxes. Confirm current federal and provincial rules with a Canadian real estate lawyer before acting.
Cross-Border Investing
Cross-border investing refers to Canadian real estate investors purchasing, financing, or managing properties in the United States or other foreign countries, which involves navigating different tax systems, financing requirements, currency exchange risks, and legal frameworks. This strategy allows Canadians to diversify their portfolios geographically and potentially access markets with lower property prices, higher rental yields, or stronger appreciation potential than their domestic market.
Deemed Disposition
A tax event recognized by CRA where property is treated as if sold at fair market value even though no actual sale occurred. Triggered by death, emigration from Canada, or conversion of property use, creating a capital gains tax liability.
Hover over terms to see definitions. View the full glossary for all terms.