US Estate Tax and the XEQT/BlackRock Canada Structure

Does Holding XEQT Trigger US Estate Tax?

No. XEQT is a Canadian-domiciled ETF listed on the Toronto Stock Exchange and managed by BlackRock Asset Management Canada Limited. It is not a US-situs asset for US estate tax purposes. Canadian investors holding XEQT are not exposed to US estate tax on those units, regardless of the fact that XEQT holds a significant allocation to US equities in its underlying fund structure.

This is one of the most valuable and least understood structural features of Canadian-listed ETFs. Understanding why XEQT is not a US-situs asset, and contrasting it with assets that are, gives Canadian investors clarity on a risk that is often exaggerated and a protection that is genuinely real.

What Is US Estate Tax and When Does It Apply?

The United States imposes an estate tax on the worldwide assets of US citizens and domiciliaries at death, and on the US-situs assets of non-residents who are not US citizens. For a Canadian resident who is not a US citizen or green card holder, the tax applies only to US-situs property owned at the time of death that exceeds USD $60,000 in value.

The combined federal exemption for 2025 is USD $13,990,000, but non-resident aliens like most Canadians do not automatically receive this full exemption. Instead, Canadians receive a prorated credit under the Canada-US Tax Treaty proportional to the ratio of their US-situs assets to their worldwide estate. For most Canadians, this means the practical US estate tax threshold is well above what they will ever own in US-situs assets. But the filing obligation (Form 706-NA) applies whenever US-situs assets exceed USD $60,000 at death, even if no tax is ultimately owed.

Effective July 4, 2025, the US One Big Beautiful Bill Act increased the estate tax exemption to USD $15,000,000 per person, raising the threshold further and reducing the practical risk for most Canadian XEQT investors even if they did hold US-situs assets.

What Counts as a US-Situs Asset

US-situs property for estate tax purposes includes:

• Shares of US corporations held directly (Apple, Microsoft, Shopify US shares, etc.).
• US-listed ETFs (such as VTI, SPY, QQQ, or any ETF trading on NYSE or Nasdaq). These are classified as US-situs assets because they are shares of US-incorporated entities.
• US real estate held directly.
• US pension plans (401k, IRA) held by a Canadian resident.
• US-domiciled mutual funds.

US-situs property does not include:

• Canadian-listed ETFs that hold US stocks (such as XEQT, VEQT, XUS, or VFV). The investor is deemed to own units of a Canadian entity, not the underlying US stocks.
• Canadian bank deposits in US-dollar accounts held at Canadian institutions.
• Canadian government bonds or other Canadian fixed-income instruments.

The Critical Contrast: US-Listed ETFs Are Different

If you hold VTI (Vanguard Total Stock Market ETF) or SPY (SPDR S&P 500 ETF) in your Canadian brokerage account, those are US-listed ETFs issued by US entities. They are US-situs assets. At death, their fair market value is included in your US-situs estate for estate tax filing purposes.

This is a genuine and important reason to prefer Canadian-listed equivalents over US-listed ETFs for most Canadian investors. XUS (iShares Core S&P 500 Index ETF, Canadian-listed) or VFV (Vanguard S&P 500 Index ETF, Canadian-listed) provide the same exposure as SPY but without US estate tax situs. XEQT, by holding Canadian-listed underlying ETFs, inherits this same protection across its entire allocation including the US equity component.

For a full comparison of Canadian vs US-listed ETF considerations, Invesco Canada and CIBC Mellon have published detailed analyses. The estate tax situs issue is one of several reasons why Canadian-listed ETFs are generally preferable for Canadian investors.

The RRSP and RRIF Caveat

An important and counterintuitive point: US stocks or US-listed ETFs held inside an RRSP or RRIF are still considered US-situs assets for US estate tax purposes, despite being inside a Canadian registered plan. The Canada-US Tax Treaty does not extend the trust protection to the underlying US assets held within a registered account.

This means that a Canadian investor who holds VTI inside their RRSP faces the same US estate tax exposure as one who holds VTI in a non-registered account. Holding Canadian-listed ETFs like XEQT inside an RRSP avoids this issue entirely. The RRSP holds units of a Canadian fund entity, not US shares directly.

Who Actually Needs to Worry About US Estate Tax

For XEQT investors, the honest answer is: very few people. The combination of:

• XEQT's Canadian-domiciled structure (not US-situs),
• the USD $15,000,000 exemption effective 2026,
• the Canada-US Treaty prorated credit, and
• the USD $60,000 filing threshold (which is about most Canadians' entire US-situs exposure if they hold no US-listed ETFs, US stocks, or US real estate),

means that a Canadian investor holding only XEQT (or other Canadian-listed ETFs) in their portfolio has zero US estate tax exposure and zero US estate tax filing obligation.

US estate tax becomes a real concern for Canadians who directly hold US-listed ETFs or individual US stocks with a total value exceeding USD $60,000, who own US real estate, or who have US pension accounts. For those investors, restructuring holdings toward Canadian-listed equivalents like XEQT is a straightforward mitigation strategy that also eliminates the T1135 reporting burden.