Is Property Transfer Tax Payable When a House Passes on Death in BC?

British Columbia lists specific property transfer tax exemption codes for transfers on death, including 09, 08, 40, 07 and 18. Many beneficiaries want to know whether tax is payable on the move from the estate to them.

The answer depends on who receives the home and how it passes. This article covers the exemptions that apply to transfers on death, and a lawyer can confirm which one fits your case.

This article covers the law of British Columbia.

Step one: the transfer to the personal representative

Exemption 09 covers a transfer to a personal representative of the deceased, where the property is part of the estate. This is the first step when title moves into the executor's name.

In plain words, a personal representative is the person who manages the estate. That is typically the executor named in the will, and where there is no will or executor, a person can be appointed through the courts. It helps to think of an inherited house as a chain of steps rather than one event. Title usually has to move out of the deceased's name before it can reach a beneficiary, and each step can have its own exemption code.

Step two: the transfer from the estate to the beneficiary

Exemption 40 (Related Individual – Deceased Estate) applies to a principal residence passed from the estate's trustee to a related beneficiary. The conditions are that the transferor is registered as trustee, the property was the deceased's principal residence immediately before death (or the beneficiary's for at least six continuous months before the death), the transferee is a beneficiary, and the transferee is a Canadian citizen or permanent resident.

Exception: exemption 40 may not be a full exemption if the property exceeds 0.5 hectares or is not residential.

Because the conditions are specific, a missing detail can change the result. For example, one condition is that the person transferring the home is registered as trustee. If that step has not been completed, it is worth sorting out before you file anything.

If the heir does not meet these conditions, for example if the heir is not related, is not a Canadian citizen or permanent resident, or the property is not a principal residence, tax may be owed. Further tax may also need to be checked. A lawyer can confirm before you register.

Other exemptions that may apply

Survivorship is different from a transfer through the estate. When a joint tenant dies, the home can pass to the surviving joint tenant, and exemption 08 covers that transfer, though not the additional property transfer tax. Whether a home is held as a joint tenancy depends on how title is held, and a lawyer can confirm that for you.

Points to check before you register

Before you file, go through the facts of the home and the people involved. These questions are the ones that most often decide which exemption, if any, fits.

• Whether the home was the deceased's principal residence immediately before death.
• Whether the beneficiary is related and is a Canadian citizen or permanent resident.
• The size of the property, since more than 0.5 hectares may limit the exemption.
• Whether the home passes by survivorship rather than through the estate.
• Whether the property is a farm.

Other taxes and costs that can come up after a death

Property transfer tax is only one item. In British Columbia, no probate fee is payable if the value of the estate does not exceed $25,000. Above that, the fee is $6 for every $1,000 or part of $1,000 by which the value exceeds $25,000, plus $14 for every $1,000 or part of $1,000 by which it exceeds $50,000. Probate fees are calculated on the gross value of the estate in the Statement of Assets, Liabilities and Distribution, and BC real property is always included.

Income tax is separate again. Under the Income Tax Act, a taxpayer is deemed to have disposed of each capital property immediately before death for proceeds equal to its fair market value. Even if the whole gain on a home is exempt, the home must still be designated on Schedule 3 and Form T1255 in the final return. An exception applies where capital property vests in a spouse or common-law partner resident in Canada within 36 months after death, which is generally treated as a disposition at adjusted cost base.

If the home sits empty, the Speculation and Vacancy Tax may also matter. When an owner dies, all owners of the property at the time of death are exempt in the year of death and the following calendar year, and the person managing the estate is also exempt. An heir is exempt for the year they legally inherit the property. What applies after that depends on the facts, so it is worth confirming with a lawyer or accountant.

What to do next

• Gather the death certificate, the will and any court grant.
• Confirm who is registered as trustee or personal representative.
• Identify the exemption code that fits each step of the transfer.
• Ask a lawyer or notary to confirm the exemption before you file.
• Keep copies of everything you submit.

Frequently asked questions