Selling the home of a family member who has passed away is a different process from a regular sale, with additional legal and tax steps. Here's what's essential so you know what to expect, though I always recommend working alongside one of our lawyers and an accountant for your specific case.
Before you can sell an inherited property, you'll typically need a certificate of appointment of estate trustee (probate), which legally confirms who has the authority to administer and sell the deceased's assets. This process can take several months, so it's important to start it as early as possible if you know the house is going to be sold.
In Ontario, the Estate Administration Tax is calculated on the total value of the estate: the first $50,000 is exempt, and 1.5% is paid on whatever exceeds that amount. For example, a $500,000 estate would pay approximately $6,750 in this tax.
Some assets don't count toward this calculation, which can reduce the amount owed: jointly owned property with right of survivorship (which passes directly to the other person), and accounts like RRSPs, RRIFs, or life insurance with a specific named beneficiary, other than "the estate".
This is where the most questions come up. When someone passes away, Canadian law considers that they sold all their property at fair market value right before death, even though no actual sale happened. If the home was the deceased's principal residence, the principal residence exemption normally applies to that calculated gain as of the moment of death.
The important point is this: as of the date of death, the home's value at that time becomes the new cost base for whoever inherits it. If the home increases in value between the date of death and the date you eventually sell it, that difference can generate capital gains tax under your name, unless the property becomes your own principal residence during that time.
The more time that passes between the date of death and the sale, the greater the chance the property's value changes, which can create taxable capital gains, on top of the costs of keeping the house vacant (insurance, utilities, property taxes). That's why, in most cases, it's worth setting a selling plan relatively soon after the probate process.
When we work together on selling an inherited house, we start with an updated value evaluation, coordinate with one of our lawyers to confirm the entire legal process is in order, and I connect you with an accountant if you need clarity on the specific tax implications of your case.
It's generally paid as part of the probate process, before your legal authority to sell is confirmed.
Not necessarily. Capital gains tax usually only applies to the increase in value from the date of death to the sale, not the home's total value.
Yes, it's essential to confirm the probate process and make sure the title transfer is done correctly.
This information is general and doesn't replace professional legal or tax advice for your specific situation. If you're handling the sale of an inherited property, send me an email with your question at contact@nataliarendon.ca and I'll connect you with the right team to support you through the whole process.