Canada Inheritance and Death Tax

Canada Inheritance Tax Laws & Information
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What is Inheritance Tax?
In Canada, there is no inheritance tax. Instead, the Canada
Revenue Agency (CRA) treats the estate as a sale, unless the
estate is inherited by the surviving spouse or common-law partner,
where certain exceptions are possible. This means that the estate
pays the taxes owed to the government, rather than the
beneficiaries paying. By the time the estate is settled, the
beneficiary should not have to worry about taxes.
Is There a Death Tax in Canada?

No, Canada does not have a death tax or an estate inheritance
tax. There is no inheritance tax levied on the beneficiaries; the
estate pays any tax that is owed to the government.

How do Canadian Inheritance Tax Laws Work?
1. When a person dies, their legal representative, the executor,
has to file a deceased tax return to the CRA. The due date of this
return depends on the date the person died. Any taxes owing
from this tax return are taken from the estate before it can be
settled (dispersed).
2. Once the executor has settled the estate, they must ask the
CRA for a Clearance Certificate which confirms all income
taxes have been paid or that the CRA has accepted security
for the payment. As a legal representative, it is important to get
this clearance certificate before distributing any property.
3. If you do not get a certificate, you can be held personally liable
for any amount(s) the deceased owes.
What are Canada’s inheritance tax rates?

As there is no inheritance tax in Canada, all income earned by the
deceased is taxed on a final return.

Non-registered capital assets are considered to have been sold for
fair market value immediately prior to death. Any resulting capital
gains are 50% taxable and added to all other income of the
deceased on their final return where income tax will be calculated
at the applicable personal income tax rates. They are taxed at the
applicable capital gains tax rates.
The fair market value of a Registered Retirement Savings Plan(RRSP) or a
Registered Retirement Income Fund (RRIF) is included in the
deceased person’s income and taxed at the regular applicable
personal income tax rates with no special treatment for any capital
gains earned within the RRSP or RRIF.
Are there any inheritance tax exemptions?

Certain exemptions are available for tax liability incurred for
deemed disposition. These include:
 the Principal Residence Exemption
 the lifetime Capital Gains Exemption.

How do Canadian inheritance tax laws work if the estate is not
inherited by a surviving spouse or common-law partner?
 The deceased is considered to have sold all of his or her
capital property for fair market value immediately prior to
death. This includes, with certain exceptions, all the deceased
person’s non-registered assets (personal belongings, cars,
investments, business assets, etc.).
 If any of these assets have gone up in value since their
acquisition, the estate will owe taxes on the capital gain in
the year of death. A capital gain is the difference between the
fair market value of the item when purchased and the fair
market value item of the same item at the date of death.
 For any registered assets (such as RRSPs and RRIFs), the
deceased person is deemed to have received the fair
market value of his or her plan assets immediately prior to
death. This amount must be included in the income of the
deceased person’s tax return.

How do Canadian inheritance tax laws work if the estate is inherited
by a surviving spouse or common-law partner?
Any non-registered capital property may be transferred to the
deceased taxpayer’s spouse or common-law partner.
For any registered assets (such as RRSPs and RRIFs), the
deceased person is deemed to have received the fair market value
of his or her plan assets immediately prior to death. This amount
must be included in the income of the deceased person’s tax
return.
However, it is possible to defer income tax if an eligible person has
been designated as the beneficiary of the RRSP or RRIF. An
eligible person includes a spouse or common-law partner, a
financially dependent child or grandchild under 18 years of age or a
financially dependent mentally or physically infirm child or
grandchild of any age.

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Free with no income limits. More info on TurboTax Free, click here.
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Canada Inheritance Tax Laws & Information

Revenue Agency (CRA) treats the estate as a sale, unless the

estate is inherited by the surviving spouse or common-law partner,

pays the taxes owed to the government, rather than the

beneficiaries paying. By the time the estate is settled, the

beneficiary should not have to worry about taxes.

Is There a Death Tax in Canada?

tax. There is no inheritance tax levied on the beneficiaries; the

estate pays any tax that is owed to the government.

CRA for a Clearance Certificate which confirms all income

for the payment. As a legal representative, it is important to get

this clearance certificate before distributing any property.

3. If you do not get a certificate, you can be held personally liable

for any amount(s) the deceased owes.

What are Canada’s inheritance tax rates?

deceased is taxed on a final return.

fair market value immediately prior to death. Any resulting capital

deceased on their final return where income tax will be calculated

applicable capital gains tax rates.

The fair market value of a Registered Retirement Savings Plan(RRSP) or a

Registered Retirement Income Fund (RRIF) is included in the

deceased person’s income and taxed at the regular applicable

gains earned within the RRSP or RRIF.

Are there any inheritance tax exemptions?

deemed disposition. These include:

 the Principal Residence Exemption

 the lifetime Capital Gains Exemption.

capital property for fair market value immediately prior to

death. This includes, with certain exceptions, all the deceased

person’s non-registered assets (personal belongings, cars,

investments, business assets, etc.).

 If any of these assets have gone up in value since their

acquisition, the estate will owe taxes on the capital gain in

the year of death. A capital gain is the difference between the

market value item of the same item at the date of death.

 For any registered assets (such as RRSPs and RRIFs), the

deceased person is deemed to have received the fair

market value of his or her plan assets immediately prior to

death. This amount must be included in the income of the

deceased person’s tax return.

deceased taxpayer’s spouse or common-law partner.

For any registered assets (such as RRSPs and RRIFs), the

deceased person is deemed to have received the fair market value

of his or her plan assets immediately prior to death. This amount

must be included in the income of the deceased person’s tax

However, it is possible to defer income tax if an eligible person has

been designated as the beneficiary of the RRSP or RRIF. An

eligible person includes a spouse or common-law partner, a

financially dependent child or grandchild under 18 years of age or a

financially dependent mentally or physically infirm child or

grandchild of any age.

With more than 20 years’ experience helping Canadians file their

products, including TurboTax Free, are available at www.turbotax.ca.

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