No Inheritance Tax In Canada—Except…
There is no inheritance tax as such in Canada, and you do not need to
pay income tax on money you inherit. What happens in Canada virtually
amounts to an inheritance tax, however, and should be planned for with a
Your Assets Will Be Considered Sold And Taxed
In Canada, an estate will be considered to be liquidated upon the
death of the owner of the assets, bank accounts, RRSPs, TFSAs, etc., and
the estate will be required to pay any taxes owing on these assets
before releasing any money to beneficiaries.
As noted in RetireHappy.ca,
“Reme[m]ber that at death there is no tax on the asset but there is a
potential deemed disposition of the asset for taxation purposes.” This
is a critical point and the reason estate planning needs to be done with
a financial professional like those at Shaw & Associates—preparing
for this type of taxation in advance can save the estate quite a bit in
This Includes Real Estate, Land, Investments, Etc.
Real estate, land, businesses, RRSPs, RRIFs, TFSAs and other
investments may all be considered to be “sold” upon death of the owner,
with the taxation rates that come along with that.
Again from RetireHappy.ca,
an example comes from Real Estate, “whether it’s an investment property
or a recreational property. Let’s pretend Elizabeth has an investment
condo that she has owned and rented out for over 15 years. When
Elizabeth passed away on June 30th, her condo is deemed to have been
sold for tax purposes. Let’s say she paid $150,000 originally for the
condo and now it’s worth $275,000. There is a capital gain of $125,000
of which 50% is taxable. Elizabeth’s final tax return would have to show
net rental income for 6 months of the year plus the $67,500 of taxable
Plus The Probate Fees
There are also probate fees to be considered: “Probate is a legal
proceeding whereby the Will of a deceased person is validated by the
courts. The fees vary from province to province and in most cases these
fees are based on a percentage of the value of the estate.”
Here is a brief video talking about the process of filing a tax return for a deceased person.
Don’t Pay More Tax Than You Have To
A death in the family is a very stressful thing, but talking to a
financial professional like Shaw & Associates well in advance and
making good plans is a very, very good idea. And can save you from
having to pay the government a ton of money!
Contact Shaw &
Associates Chartered Accountants for accounting help you can count on.
One complimentary meeting with us will put you and your business on a
more profitable and positive path.