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.
Thanks.Invaluable clarification. How about
ReplyDelete1. If the Principle house has been registered three ways:- Father, mother and only child? & if one parent dies?
2. Secondly if the investment properties are registered in the names of Father, Mother and a daughter and unfortunately both the parents pass away in a common disaster?
3. In Canada, would the nett rental income
has to be declared by mother, father and a child if they have equal equities in the investment properties?
I was advised that I could be taxed if I inherited my parents home in the case of a 2nd death. For example, my father passes away and my mother inherits the home. Subsequently, my mother passes away later on and then I, her son, inherit the home. I was explained that in this case, taxes would have to be paid by the estate for the home.
ReplyDeleteIs this true?
You're actually talking about two different things here. You being taxed and the estate being taxed are two totally different things.
DeleteIn Canada, beneficiaries don't pay tax on what they receive from a Canadian estate. So you, personally, won't pay any taxes associated with the estate.
The advice you received about tax on the house was crap. I sure hope it wasn't told to you by an accountant or lawyer.
If the house you're talking about was your parents' principal residence (and from the sound of the question, it is) then there is no tax on the house when it passes to the estate. Everyone in Canada is allowed to sell or will their principal residence without being taxed on it. Makes no difference which parent passes away first.
Note that if your parents own another peice of real estate, like a cabin or rental property etc, there WILL be tax when they pass away and that other property goes into the estate.
Any taxes that are owed by the estate - capital gains tax, income tax on RRIFs, etc - all has to be paid out of the estate before you inherit anything.
Lynne
Hello. Just sending a reply to ask a question. My father recently passed and before he did he signed the title to his over to his sister and himself still. He was not able to return home due to his stroke, and now that he recently passed, his sister wants to sign the title of his house over to me to sell and I'm living in Canada. She is in the states. Are there any problems I should or shouldn't worry about? I'M a little unclear of what exactly I need to do and doing some research before consulting my lawyer again
DeleteHello Lynne, I have a question regarding this. My mother recently passed away and my father still lives in their home. At the time of settling mom's estate, my brother and I were added to the deed (along with my father), at the time that we removed mom's name at land titles. Both my brother and I are grown and own our own homes (so not living with dad). Dad wishes for us to inherit his house, as indicated in his will. We thought we could avoid probate fees if we added ourselves to the title now, but in hindsight I'm now concerned that we may have created a tax liability for my brother and I if we sell the house following dad's passing. The concern is that my brother and I may each have to pay capital gains tax on a third of the house's appreciation from the date that we registered on the title. How will CRA view this? Thanks.
ReplyDeleteI am a us citizen my parents own a cottage in Canada. When they pass what do i have to do to keep the cottage.
ReplyDeleteI am a California resident with a disabled child (under 18) who has SSI (disability benefits). My aunt wants to bequeath her condo in Toronto to me, or me and my brother. If she doesthat, will I be 1.) taxed 2) will this affect my son's benefits since it is income? 3. )If it is split between my brother and me, who do not own our homes currently and are California residents, will we be taxed or made to pay any fees?
ReplyDeleteHello Lynne,
ReplyDeleteI live in BC and my husband passed away a few months ago. We owned half a duplex which is paid for, and I plan to continue living in the duplex.
We have a son who is not married. I have the intention to buy an apartment with him, joint tenancy, 50 /50 as a way of helping him now and diminish the taxes when I will pass away. He is our only son and the only relative I have.
When I die the apartment will become his property fully. In my will I will live him my PR (the duplex). The duplex will go into the estate, the probate fees will be paid and then the duplex becomes his property. The question is: Would he have to pay taxes on the duplex since he has already another property which it happens to have been owned jointly with me?
Is this a good strategy to minimize taxes? I know that if I buy the apartment as tenants in common my share of the apartment will be part of the estate and he will have to pay taxes for it.
I really appreciate your opinion. Thank you.
Christina
Dear Lynne,
ReplyDeleteMy US citizen mother owns a cabin on the lake in Canada and is wondering the best way to pass that property down through our US citizen family for the coming years. What is the best cost saving way to make that happen?
Thank you for your reply.
Lyn
Hi Lyn, I have a particular situation they could use some clarification. I live with my mum to take care of her for health reasons. When I get married my spouse and myself will liver with her. This is also her principal residence. My dad passed away and the mortgage and title still has both my parents names on it. My mum wanted to add my name to save on taxes upon her death.
ReplyDeleteWould this have any impact on capital gains or taxes to the estate or to myself if we choose to go either way. Keep in mind this is my primary residence and I personally own no other properties. My wife will retsin ownerhsp of her own condo
I've recently inherited a house from an uncle of mine, along with 4 other people. He purchased the home for 140k about 25 years ago. He passed in 2010 and wrote in his will that the house could not be sold until his brother passed away (because he was living there with him). His brother recently passed and the house has now sold. We've been told that the sale of the house will be taxed according to the difference between original sale price (140k) and the recent sale price (850k). I thought if it was a primary residence being inherited that it would only be taxed on the difference between the day he died and the day it sells. Am I miss something? Thanks!!
ReplyDeleteHi Lynne
ReplyDeleteA question on inheritance tax.
My mother-in-law recently passed and now my father-in-law is in a home. My brother-in-law is the power of attorney and the executor of finance. My father-in-law signed over the power of att to him. We recently sold the parents house and now my brother-in-law wants to divide the proceeds of the sale to the 4 children.
My question is do the children have to pay tax on the funds they receive or could it be a gift since my father-in-law is still alive?
Distributing the proceeds of the sale would be theft. Your brother-in-law does NOT have the legal authority to give that money to anyone or to take any of it for himself. As a POA, he MUST invest it for your father-in-law and doing anything else is considered theft by power of attorney. It's an offence under our Criminal Code.
DeleteLynne
Does inheriting a home that has been your principal residence trigger any unusual fees or taxes? This involves a home, owned by a single parent and has been rented to a child for their principal residence.
ReplyDeleteFirst of all, we need to clarify what "principal residence" means. It does not mean "where you live". If it was rented to you by an owner, it is NOT your principal residence. You have to own a property for it to be your principal residence.
DeleteWhen you inherit in Canada from a Canadian estate, you do not pay taxes on what you inherit. This is the same whether it's a house or money. The tax is not based on who gets the property; it's based on who owned it before you inherited it. If it was the principal residence of the deceased, then there is no capital gains tax on it. If it was not the principal residence of the deceased, then there will be tax on the transaction.
Despite the fact that the owner of the residence did not live there, it may still qualify as his or her principal residence because it was occupied by an immediate family member. I suggest that you check out Canada Revenue Agencies webpage about principal residency to see whether the parent can call the home his/her principal residence. If it's not clear, the best idea is to ask an accountant. Be sure to present the whole picture including any other properties owned by the parent when you ask the question.
Lynne
Thank you Lynne. I did misunderstand the term principal residence. My wife and I have rented from her mother for 40 years and had been hoping this might trigger some tax relief. When you say there would be tax on the transaction, are you meaning capital gains if we decided to sell, or actually on the inheritance? I will be looking at the CR webpage for some clarification.
DeleteHi Lynne. Thank you for your help. My mother has never owned a home (her own principal residence) and has lived with her mother in a duplex for 40 years. My mother lives in the upper portion of the duplex while my grandmother lives in the lower unit. Should my grandmother transfer her home in kind to my mother while she's alive to in order avoid taxes? Thank you kindly!
ReplyDeleteIf your grandmother owns the house and lives in it, then it is your grandmother's principal residence. Therefore there is no tax when your grandmother dies. Adding your mother wouldn't save a dime.
DeleteLynne
If I inherited a vacation property in Ontario, not principal residence, from my mother is there taxes to be paid? when are they due, at time of death or upon the sale of the property?
ReplyDeleteThere will be capital gains tax to be paid if the property increased in value while your mother owned it. The relevant date is the date of her death. The capital gain goes on her last tax return as income.
DeleteIf the property sits in the estate for a while before sale and increases in value before it is sold, there would be additional taxes at the time of sale.
Lynne
I have done some reading and I have a little different situation I am hoping you can clear up for me. I am an only child. Within the last 6 months both of my parents passed and my childhood home now sits empty. For all intents and purposes I consider it my home. This is where it gets a little dicey. There is no deed to home, never has been, it was built with no loans, mortgage. The only thing I have is a deed to land which also contains my grandmothers home, which she still lives in. She has legally signed over deed to land to me to help when she passes. I think I will have to apply for deed to home if down the road I look into selling property? I must add that this isn't a shack, it is a 3 story Cape Cod with ocean sunset view and boundaries to canadian nation historic park, never to be developed. Thank you, Daryl T.
ReplyDeleteIf you have the deed to the land, check to see whether it says that it includes the land "and all buildings on it" or something along those lines.
DeleteLynne
Hi Lynne,
ReplyDeleteThanks for your post.
I've a quick question. I understand the principle residence issue, my concern is this.
Father dies and leaves home in will to daugther. It was father's principle residence so he didn't have to pay capital tax on his final return.
However, would there be probate fees due on the value of the home since its going through the will?
Thanks
Yes, there would be probate fees on the value of the house.
DeleteLynne
Perfect, thanks for your quick response.
DeleteDear Lynne I have been reading your advices to different questions and learned a lot thanks for this .I have a question I have a incorporation I bought a house from my own money but in the name of incorporation for which I paid land transfer fee at that time.I have been living in this house as my primary residence since then.now I'm closing this incorporation would be best to tranfer the house title to my name or my father's name.since I bought this house with my tax paid money I don't want to pay any taxes on a house which is my principal residence and also my father's principal residence as he also lives with house since the house was bought under incorporation name. My accountant said transfer to your name will not apply capital gains tax only transfer fee will be applied however I don't want to give title transfer fee either since I live in this house and I am the owner of the incorporation as well.how can I do that .if I transfer this house to my father name who never owned a house then can we avoid title /land transfer fee.
ReplyDeleteHi,My father owns a condo in the name of himself and my mom. I want to ask that after my father's death me and my mom will inherit the condo? I live in Ontario.
ReplyDeleteYou said the property is in the name of both of your parents. So you won't inherit it. Your mother will own it if your father dies, and your father will own it if your mother dies.
DeleteLynne
Lynne
ReplyDeletemy husband dad passed away leaving the home to the 3 boys. They are getting the home put into their names. In the Will it states that "Upon the sale of the home, the proceeds of the sale will be divided between my sons..." Is there Capital Gains when the will states as such? The house was to be "held" for 18 months to allow for his wife to live there. This time frame is now up.
I assume that you are asking about the gains for the 18-month period, and not for while your husband's dad owned it.
DeleteYes, if the property gained in value during that 18 months, there would be a potential capital gain tas liability for that time period. The wording of the will won't make a difference to that.
Lynne
thank you Lynne for your reply. Yes the will allowed for the wife to live there for a period of only 18 months. The heirs would like to sell it and they are concerned about the Capital Gains issue as that 18 month time is coming to an end. Is that 18 month time frame of increased value the only tax potential tax implications?
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteHello, thanks for the article. My 3 sisters and I are to inherit my fathers home, his principal residence. Both of my sisters live with him and I own my own home. Is it better/cheaper to inherit the home or have deed transferred in our names beforehand? In the case that one sibling wishes to keep the home, do we get taxed on what is paid to us for our share or just the regular capital gains?
ReplyDeleteThere is no capital gains tax on a principal residence therefore none of you will be taxed if your father either sells it to you, gives it to you, or dies.
DeleteWhy any of you thinks it's a good idea to put three names on a house is beyond me. It has never worked, ever.
If you own another home, this house will become a taxable asset in your hands so you will pay capital gains tax if a) you own it, and b) you hold onto it long enough for it to gain in value.
Lynne
If you inherit a home you have been living in as your prinipal and only residence, is it taxable for the estate?
ReplyDeleteThe fact that you live somewhere doesn't mean it's your principal residence. In law you must OWN the property for it to be your principal residence. Since you are talking about inheriting it, obviously you don't own it. The property is NOT your principal residence, supposing you lived there for 500 years, because you didn't own it. So forget that part of it for figuring out tax.
DeleteWhether or not there is capital gains tax depends on whether it was the principal residence of the person who owned it (the person who died and left it to you). If they owned it and lived in it, it is most likely their principal residence. I say "most likely" because they might own more than one property. If it was their principal residence as defined by the Income Tax Act, then there should be no capital gains tax for the estate.
Lynne
This comment has been removed by the author.
ReplyDeleteHi Lynne,
ReplyDeleteYour posts have been very informative, thanks!
I am posting for my mother.
My grandmother passed away in 2002 leaving both her children as executors and beneficiaries of her home (primary residence). I have discovered that the land title was not transferred and remains part of my grandmothers estate.
My uncle has been living at the house for the last 16 years and my mother has a separate primary residence.
We would like to transfer the title to ensure they become tenants in common. My uncle will continue to reside at the house.
I understand that there are no taxes when a primary residence is passed down at the time of death but will there be any tax implications due to the time lapse in title transfer?
Regard,
Liz
Hi Lynne, great posts!
ReplyDeleteHope you can point us in the right direction. Our mom has one PR and in her will it states it gets passed on to me and my two other siblings. My siblings want to sell the house and divide the money from the sale as they may need the money. I want to keep the house for sentimental reasons of where we grew up and possibly as an investment opportunity to rent out. We are all in agreement with this option with I owning the home. What are the best options to avoid taxes etc. Thanks!
My mother recently passed of cancer and I took care of her for them 6 months. She was a senior citizen and left both my sister and I equal division of her mortgage free house. I have lived at the house for 6 years and their is a shared housing person paying money in the basement. My mother picked me up in the city after I became ill and we have been helping each other out since then. Can my sister force me to sell my half anmove. I do not want to sell my half, nor can I afford to buy her out because of bankruptcy and getting I'll 6 yrs ago. I live in Ontario and what are my rights? Would a judge order the sale if bills are being paid?
ReplyDeleteI'm not an expert in real property law so I think you'd be better off finding a lawyer who does a great deal of real estate work.
DeleteLynne
I am executor and beneficiary on a will
ReplyDeleteIf I use a joint credit card to pay funeral expenses will it impact monies received by inheritance as far as spousal entitlement is concerned
I don't see how it could. I don't know of a specific case where this issue was decided by a court, but it makes sense to me that it should have no impact on future inheritance. This is because you did not receive any funds, just paid them out.
DeleteLynne
Hi Lynne
ReplyDeleteLove your posted information.. I am joint owner in my Grandmothers house but dont live there it was her principal residence and i have my own house.I am in the will to inherit the house as i am the only family member left. I realize the house would go to me anyway but should i probate the house in the estate or if i skip probate will i pay capital gains when i sell it and when would capital gains be calculated from her death or when I was put on the deed? Also is it wise to get an evaluation on the house upon her death. Thanks in advace.
If you are joint owners with your grandmother, you will not need to go through probate to transfer the title to you.
DeleteGoing through probate has nothing to do with capital gains liability.
When you sell the house - I assume you're talking one day in the future - you will pay capital gains tax if it has increased in value and it is not your principal residence.
Yes it is a good idea to get a valuation at the time of your grandmother's passing.
Lynne
My husbands dad passed away and left everything to his daughter, my husbands sister. Sister wants to draw up a new deed to the dad's house and put my husband and her name on it. Are they going to have to pay taxes now or capital gains later. The sister is keeping the house because her son is living in it. Is it best to just keep it in her name. What kind of liability would my husband be responsible for? We don't even live in the same province. Thanks
ReplyDeleteWhy does the sister want to put your husband's name on it? Is it to be in joint names so that your husband will own it if the sister dies? So far I haven't thought of any other reason it might even possibly be a good idea for your husband to agree.
DeleteWhether they pay taxes now - that is, on transferring the father's house to them - depends on whether it was the father's principal residence. If it was, then there will be no capital gains tax to pay when the house transfers. There may be unpaid property tax, but that isn't something anyone can know without looking at the municipal property tax records.
If your husband is an owner of the property but it is not his principal residence (and it's not, by the sound of it) then if they sell it, give it away, or transfer it to anyone, there will be capital gains tax on your husband's portion. There may not be tax on the sister's portion. That's something that an accountant could help you figure out.
If your husband is an owner, he has the same liability as any owner: payment of property tax, public liability for a person slipping/falling/getting injured, etc. The fact that he lives in another province won't reduce his liability in any way.
Like I said at the beginning, so far I don't see why your husband is being added to this property. He'll have all the liability and no benefit from what you've said.
Lynne
Hi Lynne, I have been renting my parents home in Vancouver BC.(dad is the registered owner, living in retirement home). If he passes and I inherit the house, will I pay capital gain tax right way or only if I want to sell it? Sencond question: Is it possible to mortgage the above said property to cover costs of major repairs? Thanks
ReplyDeleteDad left his PR to 3 of us. Bro lives in it as his PR. Dad died last year. Value of house at DOD was 90k. Then got letter indicating 120 now. Realtor wants to try to get 120k for it. How much capital gains? Does bro not pay it?
ReplyDeleteIt's going to take an accountant to give you an authoritative answer but I'll give you my thoughts. When your father died, there was no capital gains tax on the transfer from him to other parties. If the property has increased in value since your father's death, that cannot be sheltered under him because he's out of the picture. So the maximum gain should be $30,000, half of which is taxable. In other words, there is $15,000 in tax. Now, who has to pay that? It sounds as if there are three owners, so the tax is split between you three. But one brother lives there and claims it as his principal residence, so he doesn't have to pay anything on his third. Whether you and your other sibling have to pay will depend on several factors, but if you both own other properties and live in them, you can't claim your father's former residence as your ppl residence and you'll have to pay your full share of the tax.
DeleteThis is just one of the many reasons I constantly urge parents not to leave their homes to more children than are reasonably going to live there.
Lynne
Hi Lynne,
ReplyDeleteYou have a great and informative blog! I have read through and learned alot, thank you. I Hope you can help shed some light into our situation. My widowed mom has two homes. Her PR and a rental home that use to be her PR but not since 2004 when my parents moved and began renting it. Mom is talking about selling her property(s), for two reasons, she doesn't want the hassle or carrying costs since she lost my Dad and his pension income when he passed away a couple of years ago, and to use the money to help my sister (we are two siblings) buy a house again. Sister lost her house to bankruptcy and has been living in parents PR since 2011 with her family. I believe my mom wants to still live with my sister but be able to help her buy a home of her own while my mom lives and not have my sister wait to inherit to do so. I believe the best steps to take are for my mom to sell her current PR and gift the tax free proceeds. Then claim her current rental as her PR and eventually sell it (or not)as her PR to save on the capital gains. Can you please comment on any pitfalls with this plan? Is it even possible to do? How long must my mom claim her (rental) home as her PR before she may sell it tax free? Does she need to physically live there to do so? Am I missing any tax pitfalls that may happen by suggesting these steps to my mom? Thank you in advance Lynne.
It is possible for your Mom to take the steps you've outlined. She can sell her principal residence and not incur capital gains tax. If it has been her PR since moving in, the tax-free status should apply to all years she was there.
DeleteShe will only be able to claim the rental property as her PR if she lives there or one of her kids lives there (which appears to be the case). Also the tax-free status will not go back indefinitely. She will not be able to avoid capital gains tax for the years during which it was rented out to others.
There is no minimum time period during which you must live in a property for it to be a principal residence.
As for "other tax pitfalls", I must state that I am not an accountant. I am an inheritance lawyer. Also, I don't know anything about your mother's other assets. I'm not in a position to evaluate whether there are other pitfalls. It would be worth your time to consult a tax accountant if you have further questions.
Lynne