Canada doesn’t have an inheritance tax. However, upon an individual’s death, CRA ensures that taxes are paid on any income earned up to that point. If there’s an outstanding tax balance, the executor must file a tax return for the deceased.
Tax laws dictate what gets taxed, when it’s taxed, & at what rate. These laws are based on 4 principles: deemed disposition, withdrawal, earned income, and the responsibilities of the executor. The tax is applied beforehand, so the person getting taxed is the deceased, not the heirs.
Estate probate tax, also known as estate administration tax or probate fee, is a provincial fee imposed on the validation of a deceased person’s will by the court. It is calculated as a percentage of the total value of the deceased’s estate. The tax varies by province and is payable by the executor when applying for probate of the will.
After filing the last tax return and settling taxes, ensure you obtain a clearance certificate from the CRA. It verifies no outstanding taxes remain. Failing to secure the certificate could leave you liable for any subsequent tax liabilities identified by the CRA, even after assets are disbursed.
If there’s a surviving spouse or CLP, a non-registered capital property can be transferred to them without needing to report a capital gain as income.
In the absence of a surviving spouse, CLP, or other eligible beneficiary, all estate assets are considered to have been sold at the time of death.
ATA Professional Corporation provides expert guidance on estate tax matters, ensuring compliance with legal requirements and maximizing tax efficiency. Our services include advising on tax implications, preparing estate tax returns, and assisting with probate procedures, ensuring smooth administration and optimal outcomes for our clients.
