Q&A: Inheritance tax

Question: I thought that there was no inheritance tax in Ontario. Does this mean that non-RRSP assets will not be taxed at inheritance? – G.N.

Gordon Pape answers: There is no inheritance tax (also known as estate tax) anywhere in Canada. Unfortunately, however, the government has other ways of grabbing a share of your assets when you pass on.

In the case of non-registered accounts, this is done by the assumption of a “deemed sale” of all assets at death, except in the case of a bequest to a spouse. A deemed sale means that any capital gains are recognized and become taxable on the final return of the deceased. Of course, if the non-registered assets are invested mainly in fixed-income securities such as GICs, any capital gains will be minimal or non-existent. But if the account holds equities and/or property that is not a principal residence, the tax liability could run into tens of thousands of dollars. The best way to minimize the tax bite is to consult a professional in estate planning and have that person help you to arrange your affairs in the best possible way.