Inherited Shares: How to Transfer Them Into Your Name in Ontario

You have been told you are inheriting stocks, ETFs or mutual funds, and the brokerage has sent you a list of documents you do not recognize.

This article explains who deals with the brokerage, when a court document is usually needed, what happens for tax purposes, and the steps to take before the shares move. Every estate is different, so use this as a map and confirm the details with a lawyer or accountant.

Who actually moves the shares

Shares in the deceased's name are part of the estate. The person who deals with them is the estate trustee (called an executor when named in a will).

Ontario's guidance tells estate trustees to contact the deceased's insurers, bank and credit card companies. The firm holding the shares will also need to be told, and it is worth asking that firm what it requires.

Some assets are treated differently when estate value is worked out. Registered plans with a named beneficiary and jointly owned assets that pass automatically to the other owner are excluded from the value used for estate administration tax. Check how each account was set up before assuming it must be probated.

Does the brokerage need probate?

In Ontario, if the deceased owned real property or assets held by a financial institution, the estate normally has to be probated. Probate means obtaining a court certificate confirming the estate trustee's authority. Smaller estates may qualify for a small estate certificate, which is available for estates valued at $150,000 or less.

If the deceased lived outside Ontario, the small estate guidance directs you to contact the courthouse in the location where they owned Ontario property. Which route fits depends on where the person lived and what they owned, so a lawyer can confirm it.

What the brokerage will usually ask for

Each brokerage and transfer agent has its own forms and its own list, and they change from time to time. The list below shows what is commonly requested, but always ask the firm for its current estate checklist.

• A certified copy of the death certificate
• The court certificate (probate or small estate certificate), or confirmation of why none is needed
• The will and any codicil, if there is one
• Identification for the estate trustee and for any beneficiary receiving shares
• A new or existing account in the beneficiary's name to receive the shares
• The firm's own estate forms, often including a request to transfer the securities in kind or to sell them

Whether the shares are moved in kind or sold depends on the will, the other beneficiaries and your own plans, so it is worth confirming the options with the estate trustee and a lawyer.

Tax: your cost base and the final return

For tax purposes, the deceased is deemed to have disposed of each capital property at fair market value immediately before death, and the person who acquires it because of the death is deemed to acquire it at that same value. In practice, this value becomes your cost base for the inherited shares. Ask the brokerage for the value on the date of death, and keep that record.

There is an important exception. Property passing to a spouse or common-law partner, or to a qualifying spousal trust, is rolled over at the deceased's adjusted cost base, provided it vests indefeasibly in the recipient within 36 months after death. That defers the gain rather than triggering it on the final return.

How the deemed sale is reported depends on the estate's situation, so it is worth confirming with an accountant. If the person died between January 1 and October 31, the deceased's final return is generally due April 30 of the following year; if they died between November 1 and December 31, it is due six months after death. Late filing can bring a penalty of 5% of the balance owing plus 1% for each full month late, up to 12 months, along with interest.

Before the estate trustee distributes: the clearance certificate

Before distributing property, a legal representative must obtain a clearance certificate. If they distribute without one and tax is owing, they can be personally liable up to the value of what was distributed. For that reason, many estate trustees will not release all the shares until the tax picture is settled.

The certificate confirms the estate has paid the income tax, interest and penalties owed at the time it is issued, or that the Minister has accepted security. The application is made on Form TX19. It is requested only after the required returns are filed, notices of assessment received, and amounts paid or secured. CRA acknowledges the request within 45 days, and assessment can take up to 120 days if all documents are provided.

Estates that value investments for estate administration tax should note that investments count toward the value, while assets with a beneficiary designation and jointly owned assets passing automatically do not. For estates over $50,000 the tax is $15 for every $1,000 of value, or part of $1,000.

What to do next

• Confirm who the estate trustee is and whether a will exists
• Ask the brokerage for its estate checklist and the date-of-death values
• Find out whether each account has a beneficiary designation or a joint owner
• Decide with the estate trustee whether to apply for probate or a small estate certificate
• Keep every statement and record of value, since you will need them for your cost base
• Ask an accountant whether any rollover applies and when the clearance certificate can be requested

If the shares are a large part of the estate, the family disagrees, or the deceased lived or owned property outside Ontario, speak with an estate lawyer before signing the brokerage's forms.

Frequently asked questions