Deemed disposition on death
Canada has no estate or probate and death tax — but ITA s. 70(5) deems a disposition of all capital property at fair market value immediately before death, recognising accrued gains on the terminal return. The result mimics an estate tax in effect, with spousal rollover and several supplementary returns offering the main relief.
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1. Deemed disposition at FMV
Capital property is deemed disposed of at FMV; the resulting gains are reported on the terminal T1. Land inventory and depreciable property follow modified rules.
2. Spousal rollover — s. 70(6)
Property passing to a surviving spouse or common-law partner (or to a qualifying spousal trust) rolls over at adjusted cost base by default, deferring gain until the spouse's later disposition or death. The executor may elect out on a property-by-property basis to use up the deceased's losses or LCGE.
3. RRSP / RRIF on death
Full FMV included in the deceased's final return unless the spouse or financially dependent child is named beneficiary (rollover via s. 60(l)), or the estate elects a refund of premiums. Failure to name a beneficiary directly on the plan creates needless inclusion plus probate exposure.
4. TFSA — successor holder vs beneficiary
Successor holder (spouse only): seamless takeover, TFSA continues without using the survivor's room. Beneficiary (anyone): FMV at death paid out; post-death growth is taxable to the recipient. Successor-holder designation is one of the most under-used estate-planning tools.
5. LCGE on CCPC shares at death
The deceased's $1.25M LCGE is available on the terminal return against QSBC share gains, provided the shares meet QSBC tests at the moment of death — making pre-death purification important for family-business estates.
6. Rights-and-things return — s. 70(2)
An optional separate return for "rights or things" (unpaid dividends declared but not received, accrued bond interest to date of death, work-in-progress, etc.) lets the executor use a second basic personal amount and lower marginal rates — frequently $5–15k of tax saving.
7. Probate fees — by province
No federal probate tax; provincial fees range from zero (QC notarial wills) to ~1.5% (ON, NS) of estate value. Use our Probate Fee calculator and consider beneficiary designations, joint ownership (with eyes open about the WTC/RRSP attribution and capital-gains exposures), alter-ego/joint-partner trusts, and multiple wills (ON, BC).
8. Clearance certificate — Form TX19
The executor should obtain a Clearance Certificate from CRA confirming all taxes paid before distributing estate residue. Distributing without it exposes the executor to personal liability for any subsequent CRA assessment (s. 159).
9. Corporate-owned life insurance + CDA
Life insurance proceeds received by a CCPC, less the policy's ACB, credit the Capital Dividend Account. The CDA balance can be paid out tax-free to Canadian-resident shareholders by capital dividend (s. 83(2) election). A central tool in family-business estate equalisation.
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