Can assets pass to a surviving spouse tax-free when someone dies in Ontario?

Yes, under Canadian federal tax rules, certain assets can be transferred to a surviving spouse or common-law partner at their original cost base rather than at fair market value — a mechanism known as a spousal rollover. This defers the capital gains tax that would otherwise be triggered by the deemed disposition at death until the surviving spouse eventually disposes of the assets or dies.

For the rollover to apply, the assets must be transferred directly to the surviving spouse or to a qualifying spousal trust. An estate can also elect out of the rollover on a property-by-property basis — for example, if the deceased had capital losses that could offset gains, it might be advantageous to trigger some gains on the final return.

RRSPs and RRIFs have a parallel provision: the proceeds can be transferred to the surviving spouse's registered account on a tax-deferred basis if the surviving spouse is named as beneficiary or the proceeds are transferred within the estate. Proper coordination between the will, beneficiary designations, and tax planning is important. Speak with an estate lawyer and accountant together.