Is an Inheritance Taxable in British Columbia? What You Owe

If you have been named in a will or are in line to inherit, one of your first questions is probably whether the money or property will be taxed in your hands. The word "inheritance tax" gets used loosely, and it is easy to mix up the different amounts that may be owed when someone dies.

This article separates those amounts: what you receive, what the deceased's own final return involves, and what the estate pays in probate fees. Your situation may have details that change the picture, so treat this as a starting point.

This article covers the law of British Columbia.

Do you pay tax on what you inherit?

For most people, the answer is no. Most gifts and inheritances are amounts that individuals do not have to report as income on their tax return. That means receiving money from an estate does not normally add to your own income for the year.

"Most" is not "all", though. Some situations are more complicated, such as inheriting property from outside Canada or living outside Canada yourself, where reporting obligations may apply. Whether anything applies to you depends on the facts, and an accountant can confirm it.

Three different amounts people confuse

When a death leads to a bill, it usually falls into one of these categories. They are paid by different people for different reasons.

The final return and the clearance certificate

The deceased person still has a final tax return. It is due April 30 of the year after death if the death occurred between January 1 and October 31 inclusive. If the death occurred between November 1 and December 31 inclusive, it is due 6 months after the death.

Before the estate is handed out, the legal representative can ask the Canada Revenue Agency for a clearance certificate on Form TX19. This matters to you because a representative who distributes assets without one is personally liable for unpaid amounts, up to the value of the assets distributed. Many representatives therefore wait, and that can delay your share.

The request should be made only after all required returns are filed, notices of assessment are received, and all amounts owing are paid or secured. It should not be sent at the same time as the returns. If new property turns up after a certificate is issued, another certificate is needed before that property is distributed.

Probate fees are paid by the estate

Probate fees are set by the Probate Fee Act, and the exact amount for a particular estate depends on its value and the facts, so it is worth confirming with a lawyer. They are $6 for every $1,000 or part of $1,000 of estate value over $25,000 up to $50,000, plus $14 for every $1,000 or part of $1,000 over $50,000. The estate pays these fees, and they are not a tax on the beneficiary.

If the estate's value does not exceed $25,000, no probate fee is payable. Grants de bonis non, cessate grants and double probates are also exempt. Because the fee comes out of the estate, it reduces what is available to distribute, but you do not write a separate cheque for it as a beneficiary.

What to do next

• Ask the executor or administrator whether a final tax return has been filed and whether a clearance certificate has been requested.
• Ask roughly when distribution is expected, understanding that waiting for the clearance certificate can take time.
• If you live outside Canada, or the inheritance includes foreign property, speak with an accountant about reporting obligations.
• Keep records of what you receive and when.
• If you are the executor, get advice before distributing anything, since personal liability can follow.

A lawyer or accountant can look at the estate's actual assets and tell you what applies in your case.

Frequently asked questions