Speculation and Vacancy Tax on Inherited Property in BC

An inherited home often sits empty for a while as an estate is sorted out. If the home is in a part of British Columbia where the speculation and vacancy tax applies, you may wonder whether the estate or the heir owes it.

This article explains the estate-related exemptions and who declares. Whether tax is owed in a later year depends on the facts, so a lawyer or accountant can confirm your position.

This article covers the law of British Columbia.

The exemption in the year of death and the next year

When an owner dies, all owners of the property at the time of death are exempt in the year of death and the immediately following calendar year. The person managing the estate is also exempt, even if that person was not on title at death.

In plain terms, this gives the estate a window of time. The window is measured in calendar years, so the year of death counts as the first year and the next calendar year as the second. Estates can take a long time to finish, which is why it helps to know exactly when the window closes.

After that period, a vacant inherited home may owe the tax unless another exemption applies. That is why a slow estate matters.

Exemptions for heirs and trustees

• An heir is exempt for the year they legally inherited the property, meaning the calendar year of acquisition through the distribution of an estate.
• The trustee of a trust created by a will for a minor beneficiary is exempt as long as the child is a minor, through the year the child turns 19.

The heir exemption covers only the year of inheritance. In later years, whether the heir owes the tax depends on whether another exemption applies to their situation. A lawyer or accountant can help you check.

These exemptions protect different people. One covers the owners and the person managing the estate, one covers the heir in the year of inheritance, and one covers a trustee for a minor. If a home passes to several people or into a trust, which exemption fits depends on the facts, so it is worth confirming with a lawyer or accountant.

Who makes the declaration after a death

Where the deceased was the sole owner, the person legally managing the estate declares until the estate is concluded. Where the owners were tenants in common, the estate manager declares for the deceased until probate concludes, while surviving owners declare for themselves.

A power of attorney ends at death. If no representative has been appointed, the declaration is needed once the court appoints one.

The declaration follows who is legally managing the estate, so it helps to settle early who that person is. If the situation is unclear, for example because no one has yet been appointed, a lawyer can explain what applies to you.

A common timeline to watch

Consider a home where the owner dies in one year. The exemption covers that year and the next. If the estate distributes the home to an heir in a later year, the heir is exempt in that year of inheritance. Between those periods, or after them, the home may need another exemption. Dates vary, so check your own timeline.

For example, if the estate distributes the home in the third year after the death, the year of death and the next year are covered by the first exemption, and the third year is covered for the heir. The years that fall outside those exemptions would need another exemption to be in place. Every estate moves at its own pace, so mark the dates on a calendar and review them with a lawyer or accountant.

Other costs that can come with an inherited home

The speculation and vacancy tax is only one piece. Other British Columbia rules can also affect an inherited home, and a few are worth knowing about.

• Probate fees: 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 over $25,000, plus $14 for every $1,000 or part of $1,000 over $50,000. British Columbia real property is always included in the value.
• Property transfer tax: a transfer to a personal representative of the deceased, where the property is part of the estate, is exempt.
• Property transfer tax for heirs: a principal residence passed from the estate's trustee to a related beneficiary is exempt if conditions are met, including that the beneficiary is a Canadian citizen or permanent resident. It may not be a full exemption if the property exceeds 0.5 hectares or is not residential.
• Joint tenancy: a transfer to the survivor of a joint tenancy on the death of a joint tenant is exempt, but this does not cover the additional property transfer tax.

Whether an heir qualifies for a property transfer tax exemption depends on the facts, so confirm your position before the home is transferred.

What to do next

• Note the date of death and the year the exemption period ends.
• Confirm who is legally managing the estate and whether a court appointment is needed.
• Track the year the home is legally transferred to the heir.
• Keep records of occupancy, rentals or other use of the home.
• Ask a lawyer or accountant before the exemption period ends if the home will still be vacant.

Frequently asked questions