Monday, March 28, 2011
How much are Canadian inheritance taxes?
Posted by Lynne Butler
The answer is relatively simple for once. A beneficiary living in Canada who receives an inheritance from an estate in Canada is not taxed on the inheritance. Hooray!
This doesn't mean that taxes won't affect a beneficiary indirectly. When there are taxes to be paid by a deceased, such as capital gains tax on real estate, or income tax on an RRSP, those taxes are paid out of the estate. This means that a beneficiary who is inheriting the estate is going to inherit less because the taxes have taken a chunk.
Also, the fact that something transferred tax-free to a beneficiary doesn't necessarily mean that there will never be any tax associated with that asset. For example, your mother passes away and leaves you her house. There is no capital gains tax on the transfer to you because it was her principal residence. You already have a house that you live in, so you rent it to someone for a couple of years while you decide what to do about it. Eventually you decide to sell it. If the house increases in value over that couple of years, you will have to pay the capital gain tax on the increase.
Perhaps there are no simple answers to tax questions.