How to Sell Inherited Property in Ontario: Steps for Beneficiaries

Inheriting a house or a piece of land often comes with pressure to sell quickly. But in Ontario, being named in a will does not usually mean you can list the property the next week. The estate has to be put in order first.

This article walks through the usual sequence: who has authority, what probate involves for real property, the tax steps that come before and after a sale, and what to do if some beneficiaries are under 18 or cannot be found.

Who can sell inherited property?

An estate trustee collects the estate assets, pays taxes and debts, and distributes the residue to those entitled. Who has authority to deal with the property during that process depends on your situation, so it is worth confirming with a lawyer.

How the property was held also matters. Jointly owned assets that pass automatically to the other owner are excluded from the estate value used for Estate Administration Tax. Real estate outside Ontario is also excluded from that value. How this applies to a particular property depends on the facts, so it is worth confirming with a lawyer before you assume who can sell.

Probate for real property

If the deceased owned real property, the estate normally has to be probated through a Certificate of Appointment of Estate Trustee. Until that is in place, it is worth confirming with a lawyer who has authority to sign for the estate.

Probate has costs and filings of its own:

• 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 the estate's value over $50,000, for applications on or after January 1, 2020.
• The value is rounded up to the nearest thousand.
• 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.
• If any beneficiary is under 18, the Office of the Children's Lawyer must be served when applying for the certificate.

The exact court forms and notice steps change from time to time, so a lawyer should confirm the current ones.

Tax steps that affect a sale

Capital property, including inherited houses and land, is treated as disposed of immediately before death at fair market value, and any gain or loss is reported on the deceased's final return. When a beneficiary later sells, the gain or loss is measured against the fair market value reported on that return. That is why a date-of-death valuation matters.

Two exceptions come up often. Property passing to a surviving spouse or common-law partner, or to a qualifying testamentary spousal trust, may result in no capital gain or loss on the final return, if the property vests in the spouse within 36 months of death. And even when the principal residence exemption covers the whole gain, the legal representative must still designate the home as a principal residence on the final return using Schedule 3 and Form T1255.

Before the estate trustee distributes sale proceeds, they should get a CRA clearance certificate (Form TX19). Anyone who distributes without one is personally liable for unpaid amounts, up to the value of the assets distributed. It should be requested only after returns are assessed and amounts are paid or secured.

Co-beneficiaries, missing beneficiaries and disagreements

If several people inherit a property, how and when to sell depends on the will and the circumstances, so it is worth confirming with a lawyer. If you cannot agree, speak to a lawyer early, since disputes can delay a sale and add cost.

If a beneficiary cannot be found, trust money held by trustees may be paid into court by order of the court, and the money is then subject to the court's order. This is one route for holding a share for someone who cannot be located. Separately, 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 trustees should not count on that as a safety net.

What to do next

• Find out whether a Certificate of Appointment of Estate Trustee has been applied for or issued.
• Do not list or accept offers on the property until you know who has authority to sign.
• Arrange a date-of-death valuation, such as an appraisal.
• Keep the property insured, secured and maintained while the estate is open.
• Ask the estate trustee about the final tax return, the principal residence designation and the clearance certificate.
• Speak to a lawyer about title transfer and the closing, and an accountant about tax.

Frequently asked questions