Gifts, inheritances, and windfall gains from lotteries or other gambling are generally not taxable when received in Canada.
The amounts you receive as gifts, inheritances or windfalls are considered to have been paid from after tax income and would result in double taxation if taxed again. However, like many things in the tax world, there are exceptions to this rule.
RRSP Direct Designations
If you received an inheritance from an RRSP or RRIF through a direct beneficiary designation and the estate of the deceased was unable to pay the income tax bill, you may be held liable for the proportion of income tax that would have otherwise been paid by the estate.
For those making direct beneficiary designations, be aware that you should leave some assets to your estate to allow your executor to pay the final tax bill and other expenses due upon death.
Possible Income Splitting
Under certain circumstances income generated from gifts to your children or spouse may be taxed in your hands. If you leave gifts to children in your Will using a trust, you may be able to leave not only a legacy, but also allow them to income split with your estate.
See our articles on the Canadian Income Splitting Rules and Income Splitting Opportunities. For mor infomration on estate income splitting see Income Splitting An Inheritance.
Related Articles
- Tax of Gifts & Inheritances
- Tax Free!? Lottery Winnings & Gifts
- Tax On Gifts of Foreign Stock
- Estate Sale Of Principal Residence
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