Receiving an inheritance is often emotionally complicated — grief and financial decisions arrive together. There is no need to rush. Most financial experts recommend a “pause period” of 3–6 months before making major decisions with inherited money, unless you have pressing debt or immediate needs.
This guide covers the tax implications, the probate process, and the smartest ways to put an inheritance to work once you are ready.
What happens immediately: the estate process
The executor named in the will handles the legal and tax steps. As a beneficiary, your role is mostly to wait — but understanding the process helps you set realistic expectations.
| Step | Who Does It | Typical Timeline |
|---|---|---|
| Locate and file the will | Executor | Week 1–2 |
| Apply for probate (if required) | Executor | 1–8 months depending on province |
| File the deceased’s final tax return | Executor (or accountant) | April 30 of the following year, or 6 months after death (whichever is later) |
| Pay estate debts and taxes | Estate | Before distribution |
| Distribute assets to beneficiaries | Executor | After probate and taxes are settled |
Registered accounts (RRSP, RRIF, TFSA) with named beneficiaries
Accounts with a named beneficiary pass directly to the beneficiary without going through the estate — no probate, no waiting for the will to clear.
| Account | Tax Treatment for Beneficiary |
|---|---|
| TFSA | Inherited tax-free if you are the successor holder or designated beneficiary. Any growth after the date of death is taxable |
| RRSP/RRIF → surviving spouse or common-law partner | Can be rolled over tax-free into the survivor’s RRSP/RRIF |
| RRSP/RRIF → adult child or other beneficiary | Full value included in deceased’s income for year of death — beneficiary receives the net-of-tax proceeds |
| Life insurance proceeds | Always tax-free to beneficiary |
→ See: What Happens to a TFSA When You Die | Estate Planning Guide Canada
Tax on inherited money and assets in Canada
Canada does not have an inheritance tax — you do not pay tax on assets you receive. The tax is paid by the estate on the deceased’s final return.
What the estate pays tax on
| Asset | Tax Rule |
|---|---|
| Capital property (stocks, real estate, cottage) | Deemed disposed at fair market value on death — capital gains taxed in estate |
| RRSP/RRIF (no surviving spouse) | Full value included in deceased’s income |
| Principal residence | Capital gains are usually sheltered by the principal residence exemption |
| Business or farm (qualifying) | Lifetime capital gains exemption may shelter up to $1.25M (2026) |
What you (the beneficiary) may owe going forward
Once you receive assets, any future growth is taxable to you:
| Asset Received | Your Future Tax Exposure |
|---|---|
| Cash | None — cash is not a taxable receipt |
| Stocks or funds | Capital gains on any appreciation after you receive them (your adjusted cost base is the fair market value at date of death) |
| Rental property | Ongoing rental income and eventual capital gains |
| RRSP proceeds | No future tax if it was already included in deceased’s income |
→ See: Capital Gains Tax in Canada | Inheritance Tax Canada
Probate fees by province
Probate fees are paid by the estate, not the beneficiary — but they reduce what you receive.
| Province | Probate Fee Calculation | On a $500,000 Estate |
|---|---|---|
| Ontario | 0.5% on first $50K + 1.5% above | ~$6,750 |
| BC | 0.6% on $25K–$50K + 1.4% above | ~$6,900 |
| Alberta | Flat fee caps at $525 | $525 |
| Quebec | No probate (notarial will) | $0 |
| Saskatchewan | 0.7% above $10K | ~$3,430 |
| Manitoba | 0.6% of estate value | ~$3,000 |
→ See: Probate Fees by Province Canada
What to do with the money: decision framework
Before you invest or spend anything, take this structured approach.
Step 1: Wait and park it safely
Put inherited cash in a high-interest savings account (HISA) or short-term GIC while you decide. Current HISA rates of 3.5–5.0% mean your money earns something without taking any risk.
Step 2: Pay off high-interest debt
| Debt | Action |
|---|---|
| Credit card debt (19–22%) | Pay off completely |
| Personal loans above 8% | Pay off |
| Car loans above 6% | Pay off |
| Mortgage (4–6%) | Consider partial lump-sum prepayment (up to your prepayment limit) |
| Student loan (3–6%) | Low priority — invest instead if rate is below 5% |
Step 3: Fill registered accounts
In order of priority:
| Account | 2026 Limit | Key Benefit |
|---|---|---|
| FHSA | $8,000/year (if first-time home buyer eligible) | RRSP deduction + tax-free growth + tax-free home purchase withdrawal |
| RRSP | 18% of prior year earned income (max $32,490) | Tax deduction now; tax-deferred growth |
| TFSA | $7,000 new room | Tax-free growth and withdrawals forever |
| RESP | $2,500 to maximize CESG | 20% government grant on first $2,500 |
Step 4: Invest remaining amounts in non-registered accounts
Once registered accounts are maxed:
- Broad-market ETFs (all-in-one funds like XBAL, VGRO, or XEQT) for simplicity
- Dividend stocks or REITs for income
- GIC ladder for capital preservation
→ See: Best All-in-One ETFs Canada | Asset Location Strategy
When to get professional advice
| Inheritance Size | Recommendation |
|---|---|
| Under $25,000 | Self-direct: fill TFSA/RRSP, pay debt, done |
| $25,000–$100,000 | One-time session with a fee-only financial advisor ($300–$600) |
| $100,000–$500,000 | Comprehensive financial plan from a fee-only CFP; consider tax specialist |
| $500,000+ | Estate lawyer, tax accountant, and investment advisor — the cost of getting this wrong is high |
A fee-only advisor charges by the hour and has no incentive to sell you products.
→ See: Fee-Only Financial Advisor Canada
Common mistakes to avoid
| Mistake | Why It Hurts |
|---|---|
| Investing immediately without a plan | Lump-sum investing in a volatile market can feel wrong — dollar-cost average over 6–12 months if that helps you commit |
| Letting guilt drive decisions | Relatives who suggest you “should” spend or give away inherited money are projecting; the decision is yours |
| Buying a car or taking a vacation first | One-time consumption consumes what compounding could have built over decades |
| Ignoring the tax implications of sold assets | Selling inherited stocks at a gain triggers capital gains tax — track your adjusted cost base |
| Co-mingling with a spouse’s funds without considering attribution rules | Transferring inherited money to a spouse can create attribution rules on investment income |