Non-resident tax implications on life insurance

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Hi, I am a Canadian citizen now living in the US. My mom passed away and I am the beneficiary of a Canadian-based 25k life insurance policy. I still hold a joint bank account in Canada with my sister. If I deposit this cheque into my Canadian bank account as a non-resident, are there tax implications for me? I don’t want to deposit it in the US if I can help it due to the poor exchange rate.

1 Answer

score 0 · Answer 1 · 2026-02-03T15:15:11+00:00

Hi Kim, my condolences on your loss.

From a Canadian tax perspective, a life insurance death benefit is not taxable in Canada, even if you are now a non-resident. Depositing the cheque into a Canadian bank account does not trigger Canadian tax or withholding, and the location where you deposit the funds (Canada vs. U.S.) does not change the Canadian tax outcome.

From a U.S. tax perspective, life insurance death benefits are generally not taxable to the beneficiary, including when the policy is issued by a Canadian insurer. However, with foreign life insurance policies, it is important to confirm the nature of the policy:

If this is a standard term or whole life policy, the death benefit is typically excluded from U.S. taxable income.
In more complex cases where a policy has a significant investment or cash-value component, additional U.S. analysis may be required. This does not usually affect the death benefit itself, but it can create U.S. reporting considerations.

A few additional points to be aware of:

Any interest earned after the funds are deposited (for example, in a Canadian savings account) is taxable in the U.S..
Your Canadian bank account may be reportable on U.S. forms such as FBAR and Form 8938, depending on balances.
Holding a joint Canadian bank account with your sister does not create tax by itself, but the funds should clearly be your beneficial property.

If you’d like, we can review the policy type and your cross-border reporting obligations to ensure everything is handled correctly.

Non-resident tax implications on life insurance

1 Answer

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