Beffa Law
By Monica Beffa
April 12th, 2025
Three Things You Need to Know About Taxes At Death
Navigating the complexities of taxes after death can be daunting, but it’s crucial for ensuring that your estate is managed effectively and your beneficiaries are protected. In Canada, the landscape of taxes after death is unique, with specific rules and strategies that can significantly impact your estate planning.
Is there a death tax in Canada?
In Canada, there is no inheritance or death tax levied on the beneficiaries; the estate pays any tax that is owed to the government. If you are the beneficiary of money or assets through an estate, you inherit the money tax-free, i.e. the tax has already been paid by the estate. You do not have to add inheritance to your income tax return.
What taxes apply after someone dies?
The key taxes payable on death in Ontario by the estate are:
- Estate Administration Tax (i.e. Probate Fees):
While there is no “death tax” in Ontario, your estate will have to pay an “Estate Administration Tax” (i.e. Probate Fee) to the Ministry of Finance. This tax is calculated based on the total value of all assets owned by the deceased at the time of death that will go through the probate process in court. This tax is about 1.5% of the value of the estate. - Income taxes due for the year of death:
These are the personal income taxes of the deceased. - Income taxes for any trusts (i.e. the estate from the time of death until distribution):
These are income taxes payable on income earned by the estate. - Tax on Capital Gains:
You are deemed to dispose of all capital property at death. Your estate must cover the tax on any capital gains. - Tax on Tax-Shelter Savings plans:
Registered plans such as RRSPs and RRIFs can be transferred tax-free to your spouse’s plan. If you do not have a spouse, these savings are fully taxable at your death.
