Selling an Inherited House in Ontario: Steps Before You List

Inheriting a house can feel like a gift and a to-do list at once. It is tempting to call a real estate agent right away, but in Ontario the sale usually cannot safely go ahead until the right person has the legal authority to sell.

This article walks through the usual order of steps before you list an inherited home: who can sell, probate, title, looking after the property, notice to beneficiaries and tax. Timing and details vary, so confirm your own situation with a lawyer and an accountant.

Step 1: Work out who has authority to sell

Who can sign a sale of an inherited house depends on the facts, so it is worth confirming with a lawyer before you act. The estate trustee is responsible for winding up the deceased's affairs, collecting assets and carrying out the will in line with the law.

With a will, the applicant for probate is usually the named estate trustee. Without a will, the spouse or common-law partner usually has first right, then a close adult relative such as a child, parent, grandchild, sibling, nephew or niece, and the court may appoint whoever it finds most appropriate. Until someone is appointed, nobody has clear authority to sign a sale.

Step 2: Get the certificate before you sign anything

Probate is normally needed if the deceased owned real property or assets held by a financial institution. For a real property sale, a certificate should be obtained before anyone enters into an Agreement of Purchase and Sale.

The reason is practical. Ontario land registry offices accept a Certificate of Appointment of Estate Trustee as evidence of authority for a transmission or transfer of land. Only a narrow waiver exists for first dealings after conversion from Registry to Land Titles, and it needs a supporting affidavit and an indemnity covenant to the Land Titles Assurance Fund. Most families should plan on getting the certificate.

Missing the return is costly. The penalty for failing to file the Estate Information Return, or for false statements, is a fine of at least $1,000 and up to twice the tax payable, and/or up to two years in prison. Since a house usually makes up much of the estate's value, expect the tax to matter.

Step 3: Protect the property while you wait

Probate takes time, and the house still needs care in the meantime. These are practical points rather than fixed rules, so check them with your insurer and lawyer.

• Call the home insurer and explain that the owner has died and the home may be vacant; ask what coverage applies and what conditions come with it.
• Keep paying property tax, utilities and the mortgage if there is one, and keep receipts for the estate's records.
• Secure the house, collect mail and check on it regularly.
• Do not give away, clear out or sell contents until you know who is entitled to what.
• Talk to a lawyer before signing a listing agreement or accepting offers, and remember that a certificate should be obtained before anyone enters into an Agreement of Purchase and Sale.

Understand the tax on the sale

Property the deceased owned is treated as disposed of immediately before death at fair market value, and this is reported on Schedule 3 of the final return. The principal residence designation applies only until death, and any gain may be fully or partly exempt but must still be designated on the final return.

If a beneficiary takes the house and sells it later, the gain is measured from the fair market value reported on the deceased's final return, and the beneficiary reports the sale on their own T1. Transfers to a surviving spouse or common-law partner may roll over without a gain on the final return if conditions are met.

An accountant can tell you how this applies to your situation, including whether to get a valuation as at the date of death.

What to do next

• Confirm who the estate trustee is, or who can apply if there is no will.
• Gather the will, death certificate, title details and recent property tax and mortgage statements.
• Apply for the certificate and give beneficiaries notice before filing.
• Arrange insurance and basic upkeep for the home.
• Get a date-of-death valuation and speak to an accountant about the final return.
• Wait for the certificate before agreeing to any sale.
• Ask a lawyer to handle the transfer so the title and proceeds are dealt with properly.

Frequently asked questions