Selling Inherited Property in Ontario: Steps and Tax

You have inherited a house or land in Ontario and are thinking about selling. Before a sale, you will probably want to know who has the authority to sign, what has to happen first, and what tax is involved.

The answers depend on how title was held, whether there is a will and how the estate is being managed. This article sets out the general steps and the tax rules that most often matter.

Can you sell yet?

An estate trustee collects the estate assets, pays taxes and debts, and distributes the residue to those entitled. If the deceased owned real property, the estate normally has to be probated through a Certificate of Appointment of Estate Trustee. Whether and when a sale can go ahead therefore depends on how title was held and where the estate's administration stands, so it is worth confirming with a lawyer.

Not every property goes through the estate. Jointly owned assets that pass automatically to the other owner are excluded from the estate value used for Estate Administration Tax. If the home was jointly owned, how it passes depends on how title was held, so confirm that with a lawyer.

Who signs the sale?

Who has authority to sign the agreement and transfer depends on the will and on how the estate is being managed, so it is worth confirming with a lawyer before anything is signed. Whether beneficiaries must also consent, or whether several trustees must all sign, also depends on the will and the facts, so a lawyer should confirm.

If any beneficiary is under 18, the Office of the Children's Lawyer must be served when applying for a certificate of appointment of estate trustee. A court may relieve a trustee from personal liability for a breach of trust if the trustee acted honestly and reasonably and ought fairly to be excused, but that is a safety net, not a plan, so trustees should proceed carefully.

Capital gains when you sell an inherited property

Capital property, including inherited houses and land, is treated as disposed of immediately before death at fair market value. Any gain or loss is reported on the deceased's final return (Schedule 3), and a later sale by the beneficiary is measured against the fair market value reported on that return. In practice, the gain or loss that concerns you is generally the change between that value and your sale price, so get a date-of-death valuation and keep it.

Probate costs, returns and clearance before you are paid

• Estate Administration Tax is $0 on estates of $50,000 or less. Above that it is $15 for every $1,000 (or part thereof) of value over $50,000, for applications on or after January 1, 2020.
• The Estate Information Return must be filed within 180 calendar days after the estate certificate is issued, even if the estate's value is $0 or the tax is nil.
• A legal representative should get a CRA clearance certificate (Form TX19) before distributing estate property, and is personally liable for unpaid amounts, up to the value of the assets distributed, if they do not.

These steps are the estate's responsibility, and the clearance certificate in particular is meant to be in place before estate property is distributed. How they affect the timing of a sale or of any payment to you depends on the facts, so it is worth confirming with a lawyer or accountant.

What to do next

• Find out whether the property is in the estate or passes outside it, for example by joint ownership.
• Confirm who the estate trustee is and whether a Certificate of Appointment of Estate Trustee has been issued.
• Arrange a date-of-death valuation and keep it with your records.
• Ask whether the home was the deceased's principal residence and whether the final return will designate it.
• Ask whether the property is passing to a spouse or common-law partner, which may change the tax result.
• Do not list the property or sign a sale until the trustee's authority and tax steps are confirmed.
• Speak with a lawyer and accountant before agreeing to a closing date.

Frequently asked questions