Canada Inheritance Tax Guide
the inheritance tax in Canada. Canada does NOT have a separate inheritance tax or the estate tax (unlike the US, the UK, Japan, and the most European countries). The Canadian tax system treats the inheritance as follows: the deceased's estate pays the "terminal tax" on the deemed disposition of the assets (the capital gains tax on the appreciation), the beneficiary receives the inheritance tax-free (the beneficiary does NOT pay the Canadian tax on the inherited assets). The probate fees (the "estate administration tax" — the Ontario: 0.5% on the first $50,000 and 1.5% on the balance; the BC: 0.6% on the first $50,000 and 1.4% on the balance; the Alberta: the flat fee of $250) are the closest to the "estate tax" in Canada. The spousal rollover — the assets transferred to the spouse are tax-free (the "deemed disposition is deferred" — the spouse inherits the tax basis). The beneficiary taxation — the inheritance of the cash, the stocks, the real estate, and the personal property is tax-free to the beneficiary. The inheritance of the RRSP and the RRIF — the RRSP/RRIF is included in the deceased's terminal return (the "income inclusion") unless the spouse is the beneficiary (the "spousal rollover" — the RRSP/RRIF is transferred tax-free to the spouse). The inheritance of the TFSA — the TFSA is tax-free to the spouse (the "successor holder") or the beneficiary (the "exempt contribution" after the death). The foreign inheritance — the inheritance from the foreign country may be subject to the foreign estate tax (the US estate tax for the US assets, the UK inheritance tax for the UK assets). The US estate tax for the Canadian residents — the Canadian resident inheriting the US assets (the US stocks, the US real estate, the US bank accounts) above the US estate tax exemption ($13.61 million for the 2024, indexed) is subject to the US estate tax at 18% to 40%.
Canadian Estate Tax
- No inheritance tax: Canada abolished the "estate tax" and the "succession duty" in the 1972 tax reform (the "capital gains tax" system replaced the estate tax). The Canadian tax system does NOT impose the "death tax" on the transfer of the wealth to the heirs.
- Terminal tax: The deceased's estate (the "terminal return" — the final T1 return) pays the capital gains tax on the deemed disposition of the assets (the "deemed sale" at the fair market value). The personal tax credits (the basic personal amount, the age amount, the disability amount) are available for the "terminal year."
- Probate fees: The "estate administration tax" (the Ontario: 1.5% on the estate value above $50,000; the BC: 1.4% on the estate value above $50,000). The probate fees are the "effective" estate tax (the "court fees" for the administration of the estate).
Beneficiary Taxation
- Cash and securities: The inheritance of the cash, the stocks, the bonds, and the ETFs is tax-free to the beneficiary. The beneficiary inherits the "cost base" (the "adjusted cost base" — the "tax basis") of the securities. The future capital gain (the "sell" of the inherited securities) is calculated on the inherited basis.
- Real estate: The inheritance of the real estate is tax-free to the beneficiary (the beneficiary does NOT pay the tax on the transfer). The property taxes (the "probate fees") may apply. The inherited real estate is deemed to have been acquired at the fair market value (the "cost base" — the "step-up" in the basis).
- RRSP and RRIF: The RRSP/RRIF balance is included in the deceased's terminal return (the "income inclusion" — the full balance is added to the income). The spouse (the "spousal rollover") — the RRSP/RRIF is transferred tax-free to the spouse (the "spousal RRSP/RRIF rollover"). The dependent child or the grandchild (under 18 or with the disability) — the RRSP/RRIF can be used to purchase the "life annuity" (the "tax-free rollover" into the annuity).
- TFSA: The TFSA is tax-free to the spouse (the "successor holder" — the spouse continues the TFSA with the same contribution room). The beneficiary (the "non-spouse" — the "designated beneficiary") receives the TFSA proceeds tax-free (the "exempt contribution" — the investment growth after the death is taxable).
Foreign Inheritance
- US estate tax: The Canadian residents who inherit the US assets (the US real estate, the US stocks, the US bank accounts) are subject to the US estate tax if the total US assets exceed the US estate tax exemption ($13.61 million for the 2024, indexed). The US estate tax rate is 18% to 40%.
- UK inheritance tax: The Canadian residents who inherit the UK assets (the UK real estate, the UK bank accounts) are subject to the UK inheritance tax if the UK assets exceed the UK IHT threshold (£325,000 for the 2024-25). The UK IHT rate is 40%.
- Foreign tax credits: The Canadian beneficiary can claim the foreign tax credits (the FTCs) for the foreign estate tax paid (the "foreign inheritance tax credit" — the Form T2209 for the federal foreign tax credits).
For the estate planning and the trust planning strategies, see our Estate Planning Guide →. For the spousal rollover and the deemed disposition rules, see our Leaving Canada Guide →.