According to some estimates, over $150 billion will be passed on by Canadian seniors to their beneficiaries in the next three years.
Inheritance, therefore, is one of the most common ways to transfer generational wealth to family members. While Canadian inheritance laws are fairly simple and straightforward, many citizens struggle to smoothly transfer their assets to their next of kin due to the probation process, challenges of execution, and lack of tax awareness.
Having a competent will and estate lawyer can immensely help if you’re in such a situation. A lawyer will help you understand the Canadian inheritance tax laws, fully explain the tax benefits for recipients, draft a will, and help you in the execution of your will.
So if you want to make sure that your family enjoys a smooth transition of assets upon your demise and that your assets are protected, here’s the blog you need to read.
What is Inheritance?
Inheritance can include cash, financial bonds, real estate, as well as jewellery, and possessions that are transferred from one person to another upon the owner’s demise. Most Canadians hire lawyers in Toronto to draft a will during their lifetime to make sure that when they pass away, all the beneficiaries of their will are conveniently distributed the assets.
As of today, 44 percent of Canadians are expecting an inheritance in near future.
Is Inheritance the Same as a Gift?
Often considered the same things, inheritance is quite different from a gift. Inheritance is passed to the beneficiary after the estate owner’s death, but gifts can be given during their lifetime.
So if you’re looking to reduce the size of your inheritance for certain exemptions and benefits granted by Canadian inheritance laws, then you can give gifts to your loved ones while you’re alive. Like inheritance, gifts can include property, real estate land, cash, bonds, etc.
Who Inherits the Estate?
A person can nominate as many beneficiaries as they wish to in their will. This can include your spouse, children, grandchildren, and common law partners.
Is Inheritance Taxed?
Canadian inheritance laws allow tax-free transfer of inheritance to beneficiaries. However, here are some key considerations.
Liquid Assets
Liquid assets such as cash and bonds will be transferred to the beneficiaries as it is. However, the government will tax the trust (holding the will) upon the death of the asset owner as it will upon the sudden withdrawal of assets. Beneficiaries, however, are not liable to pay any taxes on the inheritance they receive in form of liquid assets.
Non-Liquid Assets
Non-liquid assets such as real estate and cars are also not taxed. Moreover, the Canadian tax laws don’t consider it taxable income.
However, like liquid assets, non-liquid assets will also be taxed by the government to the owner upon their passing. So when someone passes away leaving behind a will, the will executor will file a final tax return to the Canadian Revenue Agency (CRA) to acquire a certificate ensuring the deceased’s taxes have been cleared. This taxation is similar to when owners suddenly sell all their assets and are required to pay a capital gain tax.
Note: A person who receives non-liquid assets can keep them tax-free until they further decide to sell them. In case you sell a property that you inherited and then used as a primary residence, the laws will be the same as selling your residential property and tax benefits will apply.
What is the Average Inheritance in Canada?
In Canada, the average inheritance received by next of kin is around $96,000. Small inheritances, however, enjoy certain tax benefits and expedited processes as per the inheritance laws of Canada.
How Long Does it Take to Receive Inheritance?
After the estate owner passes away, an estate lawyer often acting as the will executor will file probate on the deceased’s behalf. Once probate and taxation processes are completed, beneficiaries can receive their inheritance within three to six months. In case the will is contested, it may take up to a year for the inheritance funds to be released.
How to Expedite the Probate Process
One way of expediting the probate process and quickly receiving inheritance is to have a small-sized estate. A small-sized estate in Ontario is considered an estate worth up to $150,000.
What if a Person Dies Without a Will?
There are instances when people die without drafting a will. In this case, there are two solutions according to the inheritance laws in Canada.
Intestacy
Ontario’s Succession Law Reform Act allows next of kin, such as spouses, children, grandchildren, and common law partners, to file for inheritance in court. The court then fairly distributes the assets of the deceased among their family members by nominating those beneficiaries.
Escheat
If there are no contenders or beneficiaries, the estate then goes to the Canadian government. This is allowed by escheat laws that allow the government to take possession of an uncontested estate.
How to Protect Your Estate in Canada
If you own any property, real estate, or liquid assets that you want to pass on to your family members, then here are some measures to take.
- Hire a Will and Estate Lawyer: The first thing is to hire a top lawyer in Torontoto help you draft a will.
- Nominate the Beneficiaries: You can include your spouse, children, grandchildren, or common law partners as your inheritance beneficiaries.
- Appoint a Trustee/ Executor: Designate your estate lawyer to execute your will.
- Or Distribute Assets Through Gifts: If you wish, you can gift your estate to your next of kin.
Learn More About the Inheritance Laws in Canada!
Learning about inheritance laws can help you smoothly transfer your assets to your family. However, if you need to hire an estate lawyer in Toronto, reach out to Nanda and Associate Lawyers.
The law firm also has family lawyers, immigration lawyers, and estate litigation lawyers in Toronto. Book a consultation to discuss your will and estate, spousal immigration, or civil litigation matters.
