Introduction
If you’ve ever wondered what really happens to your home, investments, or family cottage when you pass away, you’re not alone. Estate planning in Canada isn’t just for the ultra-wealthy — it’s something every family should think about. Without a plan, your loved ones could face higher taxes, unexpected probate fees, and even disputes over who inherits what.
This guide will walk you through wills, probate, trusts, and capital gains on death, along with practical strategies to reduce taxes and make life easier for your family. Think of it as your roadmap to protecting your wealth and keeping your legacy intact.
At its core, estate planning in Canada is about deciding how your assets will be managed and passed on after you’re gone. It’s the process of arranging wills, setting up trusts, and using tax strategies to protect your wealth and ease the transition for your loved ones.
Your “estate” isn’t limited to real estate — it covers a wide range of assets, including:
- Your home, cottage, or other properties
- Savings and investment accounts
- Private businesses or corporate shares
- Personal belongings with financial or sentimental value
The main goal is simple: ensure a smooth transfer of assets with as little tax and probate cost as possible. A good plan gives clarity, avoids unnecessary delays, and protects your beneficiaries from surprises.
For more on how to build a plan that works for your situation, see our guide on estate planning strategies in Canada
Wills & Probate Basics
A will is one of the most important documents in any estate plan. It sets out how your assets should be distributed after your death and who will carry out those instructions.
Without a will, things get complicated. Each province has intestacy laws that decide who inherits your property. The results may not reflect what you would have chosen, and it can create added stress for your family.
Once a will exists, the estate usually goes through probate. This is the court process that:
- Confirms the will is valid
- Gives the executor legal authority to act on behalf of the estate
- Ensures creditors and taxes are dealt with before inheritances are paid out
Most provinces charge probate fees (also called Estate Administration Tax) when an estate is probated. The fees vary by jurisdiction and depend on the total value of the estate.
Executors also have significant responsibilities. They must gather assets, pay debts and taxes, and distribute the inheritance according to the will. In many cases, the executor will need a CRA clearance certificate before distributing funds. This certificate confirms that all required tax returns are filed and all amounts owing to the CRA have been settled.
Most provinces charge probate fees when an estate goes through probate. Learn more about probate fees in Canada.
Trusts in Estate Planning
Trusts are another important tool in estate planning. They allow you to control how and when assets are managed or distributed, either during your lifetime or after your death.
There are two main types of trusts:
- Testamentary trust: Created when you pass away through instructions in your will. These are often used to manage assets for minors or dependents who may not be ready to handle an inheritance on their own.
- Inter vivos trust: Set up while you’re still alive. This type of trust can be useful for wealth management, tax planning, or asset protection during your lifetime.
From a tax perspective, trusts are considered separate taxpayers. Each one must file a T3 Trust Income Tax Return every year. Income that stays inside the trust is generally taxed at the highest marginal rate. However, if the income is distributed to beneficiaries, they report it on their own returns and pay tax at their personal rate.
Trusts can hold a wide variety of assets, including real estate, private company shares, and investment portfolios.
For more details, read our guide on T3 Trust Income Tax Return
Probate Fees & How They Vary by Province
One of the biggest surprises for families going through an estate is the cost of probate. Also known as the Estate Administration Tax, probate fees vary widely across Canada, and the difference can be significant depending on where you live.
Here’s a snapshot:
- Ontario has one of the highest fee structures, calculated as a percentage of the estate’s total value.
- British Columbia uses a similar tiered schedule where larger estates face higher fees.
- Other provinces, like Alberta and Quebec, charge flat fees, making probate far less costly in those jurisdictions.
Because of these differences, probate planning can make a real impact on how much of your estate passes to your beneficiaries. Common strategies include:
- Multiple wills: Separating corporate shares or business assets from personal property can reduce probate exposure.
- Joint ownership: Assets held jointly with a right of survivorship transfer directly to the co-owner and don’t pass through probate.
- Trusts: Property placed in a trust during your lifetime is no longer considered part of your estate, and therefore avoids probate altogether.
Capital Gains on Death
When someone passes away, the CRA applies what’s called a deemed disposition. This means most assets are treated as though they were sold at fair market value immediately before death — even though no actual sale took place.
Here’s what that looks like in practice:
- Taxable amount: Only 50% of the capital gain is taxable, and it must be reported on the final return.
- Principal residence exemption: A family home may be fully or partially exempt, reducing or eliminating capital gains tax.
- Investment properties and cottages: Unlike the principal residence, these typically trigger taxable capital gains when the owner dies.
- Spousal rollover: In many cases, assets left to a surviving spouse or common-law partner qualify for a rollover. This defers the tax until the spouse sells the asset or passes away.
The rules can be complex, particularly when multiple properties are involved. Our article on capital gains rules on death explores this in more detail and explains how different types of property are treated.
Reducing Taxes with Smart Planning
One of the biggest goals of estate planning is to reduce the tax burden on your estate, leaving more behind for your loved ones. While no plan can eliminate taxes entirely, there are proven strategies that can help.
Charitable donations
Including gifts to registered charities in your will can create tax credits that offset the estate’s final tax bill. This not only supports causes you care about but also provides a direct financial benefit to your estate.
Multiple wills
Business owners sometimes use more than one will — one that covers corporate shares and another for personal assets. By separating them, you can reduce probate fees and simplify the succession process.
Trust structures
Trusts can also play a role in reducing taxes. Setting up an inter vivos trust during your lifetime can shift future growth out of your estate, helping defer tax. A testamentary trust created through your will may offer protection for dependents while giving flexibility in how income is distributed. Beyond tax, trusts can also preserve family wealth for future generations.
Estate freeze or Asset freeze
An estate freeze is a planning technique often used by business owners or investors with appreciating assets. It allows you to “freeze” the current value of your shares or property so that any future growth is passed on to your heirs, usually through a trust or holding company. This strategy locks in today’s value for your estate, while shifting future gains to the next generation — reducing the tax bill on death and making succession planning more predictable. You can read more about how an estate freeze in Canada fits into long-term planning strategies.
Executor Duties & CRA Compliance
Being named an executor is a serious responsibility. Beyond carrying out the wishes in a will, executors must make sure the estate is settled properly and all obligations to the CRA are met before anything is distributed to beneficiaries.
Key responsibilities include:
- Filing the deceased’s final personal tax return (often called a “terminal return”)
- Filing T3 trust income tax return if a trust is created
- Gathering assets, paying debts, and ensuring taxes are cleared
- Distributing inheritances once all approvals are in place
In most cases, executors must obtain a CRA clearance certificate. This document proves that all taxes, debts, and filings are up to date. Without it, executors risk being held personally liable if a tax balance is later discovered.
FAQs: Estate Planning in Canada
What happens if you die without a will?
If there’s no will in place, provincial intestacy laws decide how your assets are divided. This means your estate is distributed according to a fixed formula, not personal wishes. The process can cause delays, higher legal costs, and sometimes lead to unintended beneficiaries.
How are crypto wallets included in estate planning?
They must be disclosed like other assets. Executors need access details such as private keys, seed phrases, or custody information. These should be documented securely in the estate plan to avoid loss of funds.
Is gifting during lifetime subject to tax?
Canada doesn’t have a formal “gift tax.” However, gifting certain assets can trigger capital gains tax if the fair market value is higher than what you originally paid. This often applies to appreciated property or real estate.
Estate planning in Canada isn’t just about writing a will — it’s about making sure your wishes are respected, your taxes are managed, and your loved ones are supported through a difficult time. From understanding probate fees and capital gains on death to setting up trusts and ensuring your executor has the right tools, a clear plan brings peace of mind for everyone involved.
Conclusion
The key takeaway? The earlier you put a plan in place, the more options you’ll have to protect your assets and reduce costs. Whether it’s updating your will, exploring charitable donations, or considering multiple wills for business and personal assets, thoughtful planning makes all the difference.
If you’re ready to take the next step, contact us today and our team will assist you with you estate planning in Canada and start building a plan that works for your unique situation.