Estate Planning Essentials: What Happens to Your Money When You Die
Canada doesn't have an estate tax, but that doesn't mean your estate escapes tax-free. Understanding what happens to your RRSP, TFSA, and other assets at death can help you plan to leave more to your heirs.
The Deemed Disposition Rule
When you die, CRA treats you as having sold all your assets at fair market value immediately before death. This triggers capital gains on any appreciated property—your final tax bill.
Exceptions exist for transfers to a spouse, where assets can "roll over" at cost, deferring the tax until the surviving spouse dies.
Registered Accounts at Death
RRSP/RRIF
The full value of your RRSP or RRIF is included in your income in the year of death—potentially a massive tax bill. A $500,000 RRSP could trigger $200,000+ in taxes.
Exceptions:
- Spouse beneficiary: Tax-free rollover to spouse's RRSP/RRIF
- Financially dependent child/grandchild: Can purchase an annuity to age 18
- Disabled dependent: Tax-free rollover to RDSP or annuity
TFSA
The TFSA can name a successor holder (spouse only) who inherits it and continues contributing. For other beneficiaries, the account value at death passes tax-free, but any growth after death is taxable to the beneficiary.
Important: A TFSA "beneficiary" is not the same as a "successor holder." Successor holders get the full tax benefits. Named beneficiaries get the value but can't continue the account.
The Principal Residence Exemption
Your principal residence is exempt from capital gains tax—but only if you've properly designated it. If you owned multiple properties, only one can be your principal residence for any given year.
Probate Fees
Unlike taxes, probate fees vary by province and are based on estate value:
- Ontario: ~1.5% over $50,000
- BC: ~1.4% over $50,000
- Alberta: Flat $525 maximum
- Quebec: Minimal fees (notarial wills avoid probate)
Assets with named beneficiaries (like RRSPs and TFSAs) or held jointly bypass probate.
Strategies to Reduce Estate Taxes
- Name spouse as beneficiary: Defers RRSP/RRIF tax until second death
- RRSP meltdown: Draw down RRSPs during lifetime at lower rates
- Maximize TFSAs: Tax-free on death to beneficiaries
- Life insurance: Tax-free proceeds can cover estate taxes
- Charitable donations: Donations in the year of death can offset income
How Talk Through Wealth Helps
Plan for what you'll leave behind:
- Estimate final tax bill under different scenarios
- Model the impact of RRSP meltdown on estate value
- Compare leaving assets to spouse vs. children
- Calculate life insurance needs for estate taxes
- Track assets subject to probate
Plan Your Estate
Join the waitlist to model your estate and minimize taxes for your heirs.
Join the Waitlist