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Tax rules governing gifts, inheritances and estate administration

There is an old adage that says there are two certainties in life -- death and taxes. When it comes to estate administration in Canada, those two things play a large part as well, death for obvious reasons and taxes because inheritances and gifts, in some cases, may be considered taxable. There is no inheritance tax in Canada per se, but there are still some taxes that will affect the deceased person's estate and his or her beneficiaries.

In terms of gifts, land is taxed differently than cash. Getting land from anyone other than a legal spouse is considered taxable. Whether it is sold or not, it will be considered sold at a fair market price and the beneficiary could be on the hook for paying a capital gains tax. When a deceased person leaves his or her heirs property, it is also considered to have been sold at fair market value whether or not that is actually the case. Taxes will apply.

If a deceased person still owes taxes, the estate is responsible for paying them. A final tax return will need to be made on behalf of the deceased. All income is taxable from Jan. 1 of the year to the time of the person's death. What is left of the estate after the taxes and other debts are paid goes to the beneficiaries.

Rules governing inheritances and gifts can be quite involved and complex. A lawyer experienced in wills and estate law in Canada would be able to enlighten his or her client in estate administration legalities. Estate planning is likely to go much more smoothly with a lawyer's guidance. 

Source:, "Tax rules and consequences for gifts and inheritances", Miriam Yosowich, Accessed on Dec. 8, 2017

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