Thursday, November 25, 2010
Am I taxed when I inherit my Dad's house?
Posted by Lynne Butler
It isn't possible to give a "yes" or "no" answer to this question because a lot depends on the specific facts. But usually the situation giving rise to the question involves a parent dying and leaving his or her only house to a child. In other words, there is only one parent's name on the title to the house (as opposed to a title with joint names on it). And note that a child must be of the age of majority in that province to inherit the house.
Because the house is real estate, there will have to be a Grant of Probate or a Grant of Administration issued by the court before the house can be transferred to the child. There is a probate fee involved, and a fee to the Land Titles Office for their services. These fees are always paid by the estate, even if it means that the house has to be sold to pay them.
Assuming the Grant is issued and all fees are paid, title to the house will pass to the child. There is no capital gain assessed on the transfer of the house from the parent to the child because it was the parent's principal residence. If the Will instructed that the house be sold and the money given to the child, there is still no capital gains tax on the transaction.
If the child inherits the parent's house and later decides to sell it, the tax implications depend on several factors, including whether the house is the child's principal residence or not. So even though the child may receive the home without paying tax, he or she might have to pay tax when the house is sold or transferred.
As a general rule, beneficiaries in Canada don't pay tax on inheritances from Canadian estates.