Tax of Gifts & Inheritances

by Tax Guy - Burlington Accountant on February 16, 2009 Print This Post Print This Post

Question: A Canada Revenue Agency website states that “You do not have to include certain amounts in your income, including the following: . . . MOST gifts and inheritances.” Could you please give me some examples of when you DO have to include an inheritance or gift in your income, or give me a recommendation on where I can look for that information? Thank you for your help.

When a person passes away they are deemed to have sold all of their possessions right before they died.  The deceased’s executor must file a final income tax return for that individual and include any gains and income earned to death.  Once the income tax is paid the estate can then distribute the asset to the beneficiaries tax free.

If the deceased named beneficiaries directly on a registered account such as a RRIF, RRSP, or TFSA those beneficiaries would receive the full value of the registered account.  The value of those accounts are still included in income of the deceased and if there is insufficient assets to pay the tax bill, the CRA may collect tax in proportion to the amount of registered asset received from the beneficiaries.

Similarly, if the estate does not pay all of its taxes and the CRA reassess the estate, the CRA may collect the outstanding tax from the beneficiary.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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{ 1 comment }

carolyn allen April 7, 2012 at 10:50 am

My father has an accumulated wealth through pension, investments and insurance policies of close to if not exceeding 1 million dollars. His health is now failing but he is very tight lipped about his financial affairs. I am told I will get getting this money in some amount between myself and my sister. He has a lawyer and an accountnant and a finiancial planner. Neither my sister or I have had any dealings with the financial planner to date. He does not seem to want to share any of his finances with us at all until his death. Hopefully I can trust the above to see that his estate is handled properly for taxes and things. Should I push my father to let me in these things or leave well enough alone. I do not believe there will be any fighting or arguing over his estaste between my sister and I as we are very close.

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