Canada does not have an inheritance tax; it has a deemed disposition on death, which can produce a tax bill on assets nobody sold. For a business owner that usually lands on the shares of the company, and for a family it often lands on a property.
Planned in advance, much of it is manageable. Discovered afterwards, it has to be paid.
What this includes
- What a deemed disposition would cost your estate as things stand today
- Planning a succession to family, to a partner or to a buyer
- The final personal return after a death, and the estate's own T3 returns
- Working with the executor through to the clearance certificate
- Coordinating with your lawyer on the will and the corporate documents
- A view on whether a trust or a reorganisation actually helps in your case
For a business owner
Shares in a private company are usually the largest asset and the hardest to turn into cash on short notice. The planning question is how the tax gets paid without the business being sold to pay it, and the answer takes years rather than weeks to put in place.
After a death
There is a final personal return, and then returns for the estate while it is administered — see trust returns. Executors are personally exposed until the clearance certificate is issued, which is a good reason not to distribute everything early.
Working with your lawyer
The will, the shareholders' agreement and the corporate structure are legal documents and we do not draft them. What we do is make sure the tax consequences of what they say are understood before they are signed.
Questions we are asked about this
Is there an inheritance tax in Canada?
No. What Canada has is a deemed disposition: on death, most capital property is treated as having been sold at fair market value, and the resulting gain is reported on the final return. There are rollovers, most commonly to a spouse, which can defer it.
What does an executor have to file?
Generally a final personal return for the deceased, and then T3 returns for the estate for as long as it is being administered. Executors can be personally liable for unpaid tax, which is why a clearance certificate matters before the estate is distributed.
How far in advance should succession planning start?
Earlier than most people do. Where shares or a property are involved, the useful options take years to put in place and some of them stop being available once a transaction is in sight.
Worth reading
Where we work
We are based in Scarborough and act for clients across Toronto and the GTA in person — see accountant in Scarborough and small business accountant in Toronto — and everywhere else in Canada by email and video call.
Our other services
Corporate Tax Returns (T2) · Personal Tax Returns (T1) · Trust Returns (T3) · HST and GST Filing · Bookkeeping · Payroll · CRA Audits and Disputes · Financial Statements · Tax Planning · Incorporation and Business Setup · Cross-Border Tax
Our office
ClearWealth Accounting Advisors
1457 McCowan Rd, Suite 202
Toronto, Ontario M1S 5K7
Get directions
Open Monday to Friday, 9 a.m. to 6 p.m.
Phone: (437) 290-5117
Email: info@clearwealth.tax
