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Cross-Border Question of the Week: Does Inheriting My Mother’s IRA Trigger a Canadian Deemed Disposition?

12.11.25 // Planning & Retirement // Blog Article //

Written by: Dean Moro, BComm, CIM®, CRPC™ & Carson Hamill, CIM®, CRPC™, FCSI®: Cross-Border Portfolio Managers at Snowbirds Wealth Management

❓ Question:

My mother, a Canadian resident and U.S. citizen, passed away and named me the sole beneficiary of her IRA. I am a non-resident of Canada for tax purposes. Will this result in a deemed disposition for Canadian tax purposes?

✅ Answer:

Short Answer: No.

And honestly that’s a huge relief, because for almost every other asset your mother owned, the answer would likely be yes.

Here’s why your situation is the exception to the rule—and how it actually works in your favour. 👇

😱 The “Deemed Disposition” Scare

You’re asking this because of a very intimidating rule in Canadian tax law.

When a Canadian resident passes away, the CRA generally treats it as if they sold everything they owned at the moment before death. If their investments went up in value, the estate can face a significant capital gains tax bill.

It’s natural to assume this applies to an IRA too—but it doesn’t. 🙌

🔍 Why the IRA Is Different

To the CRA, your mother’s regular investments are considered Capital Property, which is why they’re taxed at death.

But an IRA?
The CRA views it differently—as a “Right or Thing.”

Think of it like an uncashed paycheque.
It’s money she earned but hadn’t yet received.

Because of this classification, her executor has an election available for rights or things.

📬➡️The “Pass the Tax Bill” Strategy

Instead of reporting the IRA’s value on your mother’s final Canadian tax return, the executor can elect to transfer the right to the income from the IRA directly to you, the beneficiary.

This does two things:

  • The estate avoids the tax
  • The tax responsibility shifts to you (but only when you withdraw the money from the IRA)

It’s one of the few times in tax planning where “passing the buck” actually works. 😉

✨The Magic of Being a U.S. Beneficiary

This is where everything lines up perfectly for you:

Because you are a non-resident of Canada for income tax purposes and a U.S. resident,Canada cannot tax your inherited IRA..

  • Your Mother’s Estate: Avoids Canadian tax by transferring the right
  • You (the beneficiary): Avoid Canadian tax because you don’t live in Canada
  • Result: The IRA completely bypasses the Canadian tax system 🎉

You’ll still owe U.S. income tax when you withdraw the funds—just like any other American taxpayer—but Canada gets nothing.

⚠️ A Quick Warning

This only works if your mother’s executor files the required paperwork on time—within one year of the date of death.

Miss the deadline, and the opportunity disappears. The estate could then be stuck with the Canadian tax bill.

📌 One Final Note

While Canada steps aside, the U.S. IRS is still in the picture.
The IRA's value is still part of your worldwide estate for U.S. estate tax purposes.

If your wealth exceeds the current U.S. estate tax exemption (USD $ 15 million in 2026 and indexed annually), this strategy doesn’t fix that issue.

🌎 Ready to Plan Your Cross-Border Move?

If you’re planning to move from Canada to the U.S., don’t leave your finances to chance.
We specialize in:

✔️ Cross-border financial planning
✔️ Investment management
✔️ Tax-efficient retirement strategies
✔️ Coordinating with your cross-border tax accountants and lawyers

About Snowbirds Wealth Management 🕊️

Snowbirds Wealth Management focuses exclusively on the cross-border market.
Gerry Scott, along with Dean Moro and Carson Hamill, provides investment solutions for:

  • Americans living in Canada
  • Canadians living in the U.S.

Licensed in both countries, our team helps minimize tax burdens when moving assets across the border.

👉 Schedule Your Introductory Cross-Border Strategy 📞Call Here

Disclaimer: Statistics and factual data and other information are from sources RJLU believes to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities nor is it meant to replace legal, accounting, taxation or other professional advice. We are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. The information is furnished on the basis and understanding that RJLU is to be under no liability whatsoever in respect thereof. Raymond James (USA) Ltd. advisors may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Investors outside the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Raymond James (USA) Ltd. is a member of FINRA/SIPC.

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