Passing on wealth in Canada, 2026: deemed disposition, probate fees, the cottage, and the part the law can't carry

• At death a person is deemed to have disposed of all capital property at fair market value under section 70(5) of the Income Tax Act; the gain is taxed on the final return at a one-half inclusion rate, with a rollover to a spouse or spousal trust.

• The proposed increase in the capital gains inclusion rate to two-thirds was cancelled in March 2025; the rate remains one half. The lifetime capital gains exemption on qualified small business shares is C$1.25 million.

• Ontario's estate administration tax is 1.5% of the estate's value above the first C$50,000; British Columbia charges 1.4% above C$50,000; Alberta caps its fee at C$525; Quebec's notarial wills need no probate.

No, and the absence misleads. The deemed disposition at death taxes the accrued gain on every capital asset, the cottage, the investment portfolio, the private company shares, on the deceased's final return, at the deceased's marginal rate, which in Ontario reaches 53.53% on income, so 26.76% on the gain. RRSPs and RRIFs are brought into income in full on that return unless rolled to a spouse or, in limited cases, a financially dependent child or grandchild. The final return of a person with a cottage, a portfolio and a RRIF can be the largest tax bill of their life, and it is due by 30 April of the following year, or six months after death if later.

Assets left to a spouse or a qualifying spousal trust roll over at cost, deferring the tax to the survivor's death. Most Canadian estates pay their tax at the second death, which is why the plan has to work for the survivor first and why the second death is where the cottage and the portfolio finally meet the revenue agency. The executor can elect out of the rollover asset by asset, which is the tool for using up the deceased's remaining lifetime capital gains exemption or the low brackets on the final return.

Probate, or certificate of appointment of estate trustee in Ontario, is a provincial process with a provincial fee. Ontario's is 1.5% above C$50,000, so C$22,500 on a C$1.55 million estate; British Columbia's is 1.4%; Nova Scotia's is about 1.7%; Alberta's is capped at C$525; Quebec's notarial wills avoid it. Canadians use joint ownership with right of survivorship, beneficiary designations on registered accounts and insurance, multiple wills for private company shares and personal effects (accepted in Ontario and British Columbia), and alter-ego or joint-partner trusts for those over sixty-five to reduce what passes through probate. Each has a cost in control or tax: joint ownership with an adult child can trigger a deemed disposition and expose the asset to the child's creditors and divorce, and the courts presume a resulting trust unless the gift was documented. None should be chosen for the probate fee alone.

Civil law. Notarial wills need no probate; holograph and witnessed wills must be probated by the court or a notary. Family patrimony rules divide the family residence, furniture, vehicles and registered retirement savings between spouses regardless of the will. The protection mandate, homologated by the court on incapacity, replaces the power of attorney. A Quebec family needs Quebec advice, and a Quebec will for Quebec assets.

RRSPs and RRIFs pass by designation and are taxed as income at death unless rolled over to a spouse, or to a financially dependent child or grandchild under eighteen (through an annuity to eighteen) or dependent by reason of disability (into an RDSP or a lifetime benefit trust). The TFSA passes tax-free; a spouse named as successor holder keeps it sheltered, whereas a spouse named merely as beneficiary receives the value and loses the room. The First Home Savings Account passes to a spouse's FHSA or RRSP. Check the designations at every life event; they override the will, and an estate named as beneficiary sends the account through probate and into the final return.

Continuing or enduring powers of attorney for property and for personal care, by province (Ontario's two documents, British Columbia's enduring power of attorney and representation agreement, Alberta's enduring power of attorney and personal directive); the protection mandate in Quebec. Saskatchewan and Prince Edward Island have enacted the Uniform Access to Digital Assets by Fiduciaries Act, giving executors a right of access; elsewhere the will and the asset record do the work. Four provinces (British Columbia, Saskatchewan, Manitoba, Newfoundland and Labrador) have privacy statutes that create a tort of appropriation of personality, and Quebec's Civil Code protects the image; whether the action survives death varies, and there is no general post-mortem right to a likeness.

The estate freeze, which exchanges the founder's common shares for fixed-value preferred shares so that growth accrues to a family trust; the C$1.25 million lifetime capital gains exemption on qualified small business shares, multiplied through the trust's beneficiaries; the twenty-one-year deemed disposition rule for trusts; the capital dividend account, which lets corporate-owned life insurance be paid out tax-free; post-mortem pipeline and section 164(6) planning to avoid double tax on private company shares; and life insurance to fund the tax at the second death. High-net-worth estate planning.

The cottage. Bought for C$60,000, worth C$1.5 million, deemed sold at death, taxed on a C$1.44 million gain at about C$385,000 in Ontario, and the children who wanted to keep it cannot pay the bill. Plan it while the parents are alive: the principal residence exemption on whichever property has the larger gain per year, a gift or sale to the children now with the tax paid at today's value, a trust, life insurance sized to the tax, or a family agreement about who keeps it and who is bought out.

An estate lawyer in your province (a notary in Quebec), a CPA for the final return and the freeze, a planner for the insurance. Bring the cost bases; the accountant will need them.