In Canada, there is no such thing as an “inheritance tax” or “death tax” so there are no taxes to file on monies received in an inheritance, although you may have to pay tax on income that inheritance generates.
However, there are probate fees which may have to be paid from the deceased’s estate. These fees differ from province to province. Not everything in the estate is necessarily subject to probate though; certain assets held by the deceased are excluded from the estate for probate purposes. These normally include assets held in joint tenancy with rights of survivorship, insurance proceeds, and registered accounts (i.e. RRSPs & RRIFs) with named beneficiaries.
Jake Anand explains, “I’ve found from providing tax services in Toronto for many years it’s important to discuss your estate plans with a qualified financial professional to avoid paying more needlessly. Many people view probate as something to avoid at all costs, but it’s not always to your benefit to do so. The fees for probate are actually quite modest, yet every year we see people who try to avoid leaving anything subject to probate, just to incur tax liabilities in the process that end up costing them far more than the probate fees. Not only that, but most people also forget to apply for the CPP death benefit of $2,500”
The executor also has to file the deceased individual’s final tax return and wait for a clearance certificate before the estate can be distributed.
Visit one of our Toronto locations to help you file your final return quickly and professionally.