Can Canadian Florida Real Estate Investors Utilize a Lady Bird Deed to Avoid the U.S. Gift Tax?


Canadians actively invest in real estate located in Florida. Many Canadians like to spend their winters in Florida and acquire homes near to beach destinations in the Sunshine State. Canadians that acquire real property in Florida should consider the U.S. estate and gift tax consequences associated with such a transaction.
The U.S. estate and gift tax is assessed at a rate of 18 to 40 percent of the value of an estate or donative transfer. An individual foreign investor’s U.S. taxable estate or donative transfer is subject to the same estate tax rates and gift tax rates applicable to U.S. citizens or residents, but with a substantially lower unified credit. The current unified credit for individual foreign investors or nonresident aliens is equivalent to a $60,000 exemption, unless an applicable treaty allows a greater credit. U.S. citizens and resident individuals are provided with a far more generous unified credit from the estate and gift tax. U.S. citizens and resident individuals are permitted a unified credit of $13.61 million (in 2024). There are a number of planning opportunities available to non-U.S. residents to mitigate the harsh consequences of the tax.
If a Canadian investor holds U.S. situs assets such as real estate, upon his or her death, the real property will be subject to the U.S. estate tax. Fortunately, for Canadian investors, Article XXIX(B) of the U.S.-Canada tax treaty provides relief from the U.S. estate tax by allowing the investor to claim a pro rata portion of the U.S. unified credit. The pro rata portion is based on the percentage that the individual’s gross U.S. estate bears to his or her gross worldwide estate. Under the treaty, a Canadian real estate investor is entitled to relief from the U.S. estate tax, but the treaty does not provide any relief from the U.S. gift tax. Thus, if a Canadian investor elects to gift U.S. property to a family member during his or her lifetime, the transfer could be subject to the U.S. gift tax.
Since the U.S.-Canadian tax treaty does not provide relief from the U.S. gift tax, Canadian investors investing in Florida real estate must consider planning options to gift Florida real estate to a surviving spouse or minor children. One planning option available to Canadian investors in Florida real estate is the use of a “Lady Bird” deed. The Enhanced Life Estate Deed, also known as the Lady Bird Deed in Florida is a unique deed and estate planning tool that conveys Florida property ownership from one party (the Grantor) to another party or parties (the beneficiaries) upon the death of the grantor. There are distinct tax advantages associated with utilizing a Lady Bird deed to transfer Florida real property to surviving spouse or minor children. A Lady Bird deed is not subject to a gift tax because the property ownership is not formally transferred during the owner’s lifetime. However, since the real property remains in the decedent’s taxable estate for estate tax purposes, real property transferred through a Lady Bird deed is subject to the U.S. estate tax.
There are a number of requirements for a Lady Bird deed to be valid in the state of Florida. These requirements include:
- The grantor must sign the Lady Bird deed in the presence of two witnesses and a notary;
- A Lady Bird deed must establish an enhanced life estate which grants the Canadian investor control over his or her property during their lifetime. This means that the investor has the authority to sell, transfer, mortgage, lease, and manage the Florida real estate;
- The Lady Bird deed must provide for a remainder beneficiary of the property who will inherit the real property;
- The Lady Bird deed must provide a full description of the real property being transferred;
- The Lady Bird deed must provide a provision that the property will remain in the owner’s homestead;
In certain cases, a Canadian investing in Florida real estate can utilize a Lady Bird deed to transfer Florida real property free of U.S. transfer taxes.
Anthony Diosdi is one of several tax attorneys and international tax attorneys at Diosdi & Liu, LLP. Anthony focuses his practice on domestic and international tax planning for multinational companies, closely held businesses, and individuals. Anthony has written numerous articles on international tax planning and frequently provides continuing educational programs to other tax professionals.
He has assisted companies with a number of international tax issues, including Subpart F, GILTI, and FDII planning, foreign tax credit planning, and tax-efficient cash repatriation strategies. Anthony also regularly advises foreign individuals on tax efficient mechanisms for doing business in the United States, investing in U.S. real estate, and pre-immigration planning. Anthony is a member of the California and Florida bars. He can be reached at 415-318-3990 or adiosdi@sftaxcounsel.com.
This article is not legal or tax advice. If you are in need of legal or tax advice, you should immediately consult a licensed attorney.

Written By Anthony Diosdi
Anthony Diosdi focuses his practice on international inbound and outbound tax planning for high net worth individuals, multinational companies, and a number of Fortune 500 companies.
