Spouses get a tax break

Most assets left to a surviving spouse are exempt from tax after your death. These include, among other things:

1. The family home.

2. Joint accounts.

3. Proceeds from an RRSP or RRIF.

4. Stocks, mutual funds, or other assets which have appreciated in value.

In the latter case, you are “deemed” to have disposed of your assets at death at a certain adjusted cost base. If they pass to your spouse, he or she assumes that cost base. Therefore, no capital gain will be triggered. The tax is postponed until the earlier of actual disposition of the asset by your spouse, or the spouse’s death.

Some specific criteria must be met for this exception to apply.

  • You must have been resident in Canada immediately prior to your death.

  •  Your property must have been transferred on or after your death to one or the other (or both) of the following: your spouse (who was also resident in Canada immediately prior to your death) or a qualifying spousal trust.

A spousal trust is defined as a trust created by your will whereby your spouse is entitled to receive all the income of the trust that arises duringis/her lifetime, and no other person may receive any of the income or capital from the trust. The trust must also be resident in Canada immediately after the property is settled in the trust.