We’ll forgive you for getting distracted by prairies, ski resorts and vibrant cities when you first move to Canada. However, one matter that should be top priority is protecting your assets. To protect yourself and your loved ones when you emigrate, you need to get clued up on how succession law tax on in inheritance in Canada work.
When you move to Canada, your estate will encompass everything you own at the time of your death, including property, vehicles, assets, businesses and bank accounts. In the event of your passing, your individual assets can be transferred via two methods:
- In accordance with your last will and testament, made in Canada to comply with Canadian law. In this document, just like in the UK, you can expressly state who you want to receive each of your assets.
- ‘Intestate’, or without a will. In this instance, it will be up to the Ontario Succession Law Reform Act to dictate who your assets will be transferred to.
Unlike the UK, there is no tax for estate or inheritance in Canada. Instead the Canada Revenue Agency (the equivalent of the Inland Revenue) take taxes owed to government from the estate prior to it being transferred to the beneficiary via a final income tax return. The CRA do not add tax to the assets of the estate, however they do require all tax owed on income up to the date of death be paid.
A final tax return must be filed within Canada, as of the date of the death, via the executor of the will. After the return has been filed and the tax taken from the estate, you will receive a Clearance Certificate from the CRA stating that all taxes have been paid. Without this official clearance, you could find yourself liable for any outstanding amounts the deceased owes.
It is possible to avoid this income tax charge if an ‘eligible person’ has been legally designated as the beneficiary of registered assets. An eligible person includes:
- a spouse or common-law partner
- a financially dependent child or grandchild
- a financially dependent, mentally or physically infirm child or grandchild of any age.
If the estate is not inherited by a beneficiary, Canada deals with matters as though the deceased sold all of his/her property and assets at a fair market rate immediately prior to death. If these assets have grown in value since they were purchased, the estate will be liable for taxes on the capital gain in the year of death. These capital gains will be added as another income stream on the final tax return, and income tax will be calculated and charged upon the total amount.
In addition to income tax, you will encounter probate fees when dealing with inheritance in Canada. Each Canadian province dictates their own probate fees and they are always charged based on the total assets of the estate.
Making a will
Making a will should be top priority when you move to Canada. As everyone’s assets and circumstances are different, you must you consult an expert to ensure you’re fully protected under Canadian law. A last will and testament will cost around CAD$39.95 and a full estate plan, which includes power of attorney, will cost around $89.95.
Get further advice
If you want further advice on inheritance in Canada, fill in our legal enquiry form below and our friendly Resource Team will be in touch with recommendations of lawyers specialised Canadian inheritance law.