Is Land Transfer Tax Payable When a House Passes to a Beneficiary?

If you are inheriting a house, it is natural to worry that you will face a large land transfer tax bill when title moves into your name. In many estate transfers the answer is more favourable than a regular purchase, but the details matter.

This article explains the general rule, the situations where tax can still arise, and how the land registry treats the paperwork. It is not a substitute for advice on a specific transfer.

The general rule for transfers from an estate

A conveyance from a deceased person's personal representative to a beneficiary who receives the land in satisfaction of all or part of their beneficial interest is not subject to land transfer tax. In plain terms, you are receiving what the will or the law already gives you, not buying it.

The land transfer tax affidavit shows the consideration as nil in paragraph 4, and paragraph 7 must state that the conditions are met. Accurate facts about the estate and the beneficiaries are important, so it is worth going over them carefully with the lawyer handling the transfer.

When tax can still apply

Three common situations can change the result:

• Mortgage: if a mortgage is outstanding and assumed, tax is payable on the amount owing at registration, and the assumed liability goes in paragraph 4(b)(i) of the affidavit.
• Several beneficiaries: the statements should say the transfer is from the estate to the only beneficiary entitled to the land under the will. If the transferee is one of several beneficiaries, any other estate assets surrendered to the other beneficiaries in return for the land count as consideration.
• Buying the house: if a beneficiary pays for the property instead of taking it toward their share, it is no longer a transfer in satisfaction of an interest, and a lawyer should review the tax position.

Whether any other tax applies depends on the facts of your situation, so ask the lawyer handling the transfer to confirm.

How the land registry treats the transfer

A transfer by a personal representative must include statements made by a solicitor. They address whether the transferor can transfer under the will, the Estates Administration Act and the Succession Law Reform Act, or a court order. They also cover whether title is subject to Family Law Act spousal rights and whether beneficiary consents are required.

Behind those statements sits the court certificate. Probate is usually needed if the deceased owned real property. The estate pays estate administration tax as a deposit when applying, and it becomes the tax once the certificate is issued. That tax is separate from land transfer tax and is calculated on the estate value, with a mortgage deductible from the value of real property.

Farmed land

A farmed-land exemption can apply to a transfer from the personal representative to family members of the deceased if the land was predominantly farmed before death and the principal purpose is continued farming. If tax was paid and a refund is sought, the request must be made within four years of payment. Whether your property and family relationship qualify is a fact-specific question worth confirming.

What to do next

• Confirm who is entitled to the house under the will or the law, and whether every beneficiary agrees.
• Get the current mortgage balance and decide whether it will be paid off or assumed.
• Check with the lawyer whether the estate certificate has been issued and what is needed before the transfer.
• Ask the lawyer preparing the transfer how the consideration will be stated in the affidavit.
• If the land was farmed, raise the farmed-land exemption before the transfer is registered.
• Keep copies of the transfer, the affidavit and any tax receipts.

Frequently asked questions