I live in Ontario and am a beneficiary of a US estate: how is my inheritance taxed and paid?

The CRA lists most gifts and inheritances among the amounts you do not report as income. That does not end your Canadian filing duties, though. If you are an Ontario resident and your specified foreign property cost more than $100,000 at any time in the year, you must file Form T1135, and for property received by inheritance the cost is its fair market value when received. Keep the paperwork showing the date you received the property and its value, because you will need it for the cost figure.

Form T1142 may also matter: it does not have to be filed for a distribution from a non-resident estate during its administration that arose because of someone's death, but once the estate has been administered, a Canadian beneficiary of an ongoing non-resident testamentary trust must file it for each year they receive a distribution.

US estate tax, any treaty credits and US withholding are separate questions that depend on US law, and how the estate pays you depends on the executor and the institutions involved. Speak with a lawyer or accountant who can look at both countries' rules before you accept funds or sell property.