Land Transfer Tax When an Estate Home Moves to an Heir in Ontario

Many people hear the word probate and assume a tax bill follows every time a house changes hands. In Ontario, land transfer tax and the tax charged when a certificate is issued are different things.

This article explains when land transfer tax applies to a transfer from an estate to an heir, and when it does not.

The general rule for transfers to beneficiaries

A conveyance from a personal representative to a beneficiary who receives the property in satisfaction of all or part of their beneficial interest in the estate is not taxed. On the land transfer tax affidavit, the consideration is shown as nil.

This makes sense because the estate trustee holds the property as trustee for the people entitled to it, and the transfer simply delivers that entitlement.

When tax can still apply

Nil tax applies only where no consideration of any kind passes. Consideration includes the assumption of liabilities, so tax is payable on a mortgage balance outstanding at registration, apart from certain spousal transfers.

• The beneficiary takes over a mortgage on the house: tax can be payable on the balance outstanding at registration.
• The beneficiary pays other heirs to buy them out: the payment is consideration, so tax may be owed.
• The house is sold to a third party: this is an ordinary sale, not a transfer to a beneficiary, so speak to your lawyer about the tax on that purchase.

Do not confuse it with other costs

For the Estate Administration Tax, Ontario real estate counts at its value at the date of death, less mortgages and other encumbrances. An Estate Information Return must be filed within 180 calendar days after the certificate is issued.

Timing and paperwork

Ontario guidance says probate is normally required where the deceased owned real property. For some Land Titles Conversion Qualified properties, a transmission application generally does not require a certificate if it is the first dealing since conversion, but a covenant to indemnify the Land Titles Assurance Fund must be given whenever a certificate is not applied for. Whether that applies to your property depends on the facts.

Where the property was held jointly, it may pass by survivorship instead of through the estate, and a survivorship application costs the same electronic registration fee. Where a spouse died owning an interest in a family residence as a joint tenant with a third party, the application must include a Family Law Act statement, which can be made and signed only by a solicitor.

What to do next

• Ask whether the house is being transferred to you in satisfaction of your share of the estate.
• Find out whether a mortgage balance will remain at registration.
• If you plan to buy out other heirs, ask a lawyer about the tax before you agree on a price.
• Confirm whether a certificate is needed and who will register the transfer.
• Budget for the registration fee and any legal costs.

Frequently asked questions