- A vehicle passed through an estate may be transferred to a beneficiary exempt from retail sales tax.
- The documents depend on whether there is a will, and a surviving legally married joint owner needs only a death certificate.
- Vehicles count toward the value of the estate for estate administration tax, wherever they are located.
- The exemption is not a rule that no tax ever applies to any inherited vehicle, so check unusual situations.
A car left behind by a parent, spouse or relative is often the first asset families need to sort out. It may need to be kept, given to a beneficiary or sold, and ServiceOntario will want proof that you have the right to deal with it.
This article explains the documents Ontario describes for transferring a vehicle to an estate beneficiary, how joint owners differ, and what to know about tax. Details depend on who the beneficiary is and how the car was owned.
Who deals with the vehicle
The estate trustee is the person who handles the deceased's property. Ontario's guide for seniors tells estate trustees to contact the deceased's insurers, bank and credit card companies, and ServiceOntario to cancel the driver's licence and health card, and notes that trustees may need to sell or transfer vehicles.
Until the transfer is complete, keep the car insured and safely stored, and speak to the insurer about coverage. How this applies to who may drive the car depends on your situation, so it is worth confirming with the insurer or a lawyer.
Documents for a transfer to a beneficiary
A vehicle passed through an estate may be transferred to a beneficiary exempt from retail sales tax. The paperwork differs depending on whether there is a will.
| Situation | What the beneficiary supplies |
|---|---|
| There is a will | The original or certified will naming the estate trustee (otherwise also a Certificate of Appointment With a Will or Small Estate Certificate) |
| The beneficiary is not clearly identified in the will | A letter from the estate trustee with the VIN, year, make and model |
| No will | A letter from the estate trustee plus a Certificate of Appointment Without a Will or Small Estate Certificate, or a letter from a lawyer |
| Surviving legally married joint owner | A death certificate only |
| Common-law spouse or other joint owner | The will or no-will documents described above |
In the no-will case, the letter must state the deceased's name, date of birth and date of death, that no will exists, the beneficiary's name, and the VIN, year, make and model.
Does tax apply to an inherited vehicle?
The retail sales tax exemption applies to a transfer of a vehicle to a beneficiary of the estate. That is different from a general statement that no tax ever applies. If, for example, the person getting the car is not the estate beneficiary, or they are buying it from the estate, the answer may differ, so confirm with ServiceOntario or a lawyer.
Income tax is a separate question. On death, the deceased is deemed to have disposed of capital property at fair market value, and the person who acquires it is deemed to acquire it at that value. Whether that matters for a particular vehicle depends on the facts, so an accountant can confirm.
The vehicle and the estate's value
Vehicles and vessels, wherever located, count toward the value of the estate for estate administration tax. That tax is nil for estates of $50,000 or less, and $15 for every $1,000 (or part of $1,000) for estates over $50,000.
- A vehicle held in the deceased's name counts toward the value.
- Jointly owned assets that pass automatically to the other owner are excluded.
- A car loan secured as a lien or encumbrance may be deducted only where it is an encumbrance on real property; other debts cannot be deducted.
If you plan to sell the car, how the sale should be handled depends on your situation, so it is worth confirming with a lawyer. Do not distribute estate property before checking the tax position. A legal representative who distributes without a clearance certificate can be personally liable for tax owing.
What to do next
- Find the ownership document and note the VIN, year, make and model.
- Check whether the car was owned jointly, and with whom, and whether they were legally married to the deceased.
- Locate the original will or confirm whether none exists.
- Ask a lawyer whether you need a certificate of appointment or a small estate certificate, since the rules differ with and without a will.
- Prepare the estate trustee letter with the required details.
- Contact the deceased's insurers and ServiceOntario, as Ontario's guide for estate trustees suggests.
Frequently asked questions
Do I pay sales tax when a car is passed to me from an estate?
A vehicle passed through an estate may be transferred to a beneficiary exempt from retail sales tax. That is not a rule for every inherited vehicle, so check if you are buying it from the estate or are not the beneficiary.
What do I need if there is no will?
You need a letter from the estate trustee plus a Certificate of Appointment Without a Will or Small Estate Certificate, or a letter from a lawyer. The letter states the deceased's name, date of birth and date of death, that no will exists, the beneficiary's name, and the vehicle details.
What if the car was jointly owned with a spouse?
A surviving legally married joint owner needs only a death certificate. Common-law spouses and other joint owners need the will or no-will documents.
Does the car count when calculating estate administration tax?
Yes. Vehicles and vessels, wherever located, count toward the estate's value for that tax.
Sources
- Income Tax Act s.70 (Justice Laws) — Justice Laws (federal)
- Income Tax Act s.159 (Justice Laws) — Justice Laws (federal)
- Ontario – Estate Administration Tax — ontario.ca
- Ontario – Retail Sales Tax: Specified Vehicles — ontario.ca
- Ontario – Guide to Programs and Services for Seniors: End of life — ontario.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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