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No inheritance taxes in Ontario


There are no true inheritance taxes in Ontario.  In other words, there are no taxes that a person who inherits from an estate must pay.

Beneficiaries do not pay tax on the money they inherit from an estate.

Taxes payable by an estate

There are some taxes that the estate must pay.

These taxes reduce the estate, and should be paid before any distribution of the estate to beneficiaries (inheritors).

The key taxes payable on death in Ontario by the estate are:

  • Estate Administration Tax (otherwise known as probate tax or probate fees) – approximately 1.5% of the value of the estate (use our probate fees calculator to approximate the amount of Estate Administration Tax payable – see below). This is the only true ‘estate taxes’ payable in Ontario.
  • Income taxes due for the year of death. These are the personal income taxes of the deceased, albeit with the taxable income including any unusual ‘income’ that occurs because of the death.
  • Income taxes for any trusts (for instance, the estate from the time of death until distribution). There are income taxes payable on income earned by the estate (for instance, in interest earned on GICs or savings accounts by the estate from the time of death to the time of distribution).

EAT – Estate Administration Tax

Estate Administration Tax is a tax on the value of the assets of the estate on the date of death. Assets that pass outside the estate – for instance, a home owned jointly with a spouse – does not trigger this tax. Proper tax planning before death can substantially reduce or even eliminate Estate Administration Tax. After death, depending on the circumstances, it is from time to time possible to avoid probate entirely or reduce the amount of Estate Administration Tax if the estate can be reduced before probate. Contact us for more information.

Much more information about calculating EAT, paying it, preparing and filing the required tax return can be found here:  Probate Tax in Ontario.

Income Taxes

Estates must pay income taxes. They are not taxes on the assets or capital value of the estate – they are taxes on the income received either by the deceased (in the last year of life) or by the estate.

Executor’s liability for taxes

The estate trustee is personally liable for the taxes due by the estate.

Therefore, the estate trustee absolutely must calculate and pay the income taxes due and obtain a clearance certificate before distributing the estate to the beneficiaries.

Preparing the tax returns for the last year of the deceased and for the estate are complex and unusual. We provide these services at very nominal cost. Please contact us for more information.

Learn more about income tax obligations of estates here:  Income Taxes on Estates

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