Financial Post
By Jason Heath, March 17th, 2025
Many seniors own homes, cottages or rental properties and upon their death these assets will make up part of their estate. Their children may be wondering what to do with inherited real estate, whether they are engaging in pre-planning collaboratively with their parents or once they become beneficiaries.
As a starting point, it may be helpful for parents and children to understand what happens to real estate when someone dies and someone else inherits it. There may be tax, probate and other implications that range from minimal to significant. Upon someone’s death, the tax implications depend upon who inherits their assets. When a spouse inherits, assets can be made over on a tax deferred basis. When someone other than a spouse inherits, there are tax implications.
Some parents try to avoid capital gains tax or probate by adding a child’s name to a property and making it joint with right of survivorship. This will not avoid capital gains tax. Tax may be partially triggered when a child’s name is added if this is considered a gift of 50 per cent of the property value at that time. The fact that no money changes hands does not avoid a deemed disposition at the fair market value.
Jason Heath, Objective Financial Partners Inc., Toronto
There can be sentimental reasons to keep inherited real estate, but —unless you plan to use the property personally— you should ask yourself: would you buy that real estate with an equivalent amount of cash?
Holding real estate after you inherit it does not save tax. The tax implications of inheriting from anyone other than a spouse are triggered upon the owner’s death. And —while prices have appreciated significantly over the past 20 years— there may be simpler, more diversified, and potentially better, more tax efficient ways to invest the proceeds.
Jason Heath, Objective Financial Partners Inc., Toronto
I do not sell investments so I have no skin in the game. I just think it is important for beneficiaries of inherited real estate to keep a property “on purpose” rather than by default, and reflect on some of these considerations.
