# Estate planning: the tax side

> What happens to your property for tax purposes when you die, and what you can arrange now: spousal rollovers, plan beneficiaries, estates and gifts.

- Web page: https://taxnotes.ca/guides/estate-planning/
- For: Everyone · Topic: Planning
- Last reviewed: 2026-10-11

When you die, you're treated as having sold most of what you own, and RRSPs and RRIFs generally become income on your final return. Much of that tax can be postponed, depending on who gets what. This guide covers what you can arrange now; for what happens after a death, see [wills, estates and the final return](https://taxnotes.ca/guides/wills-and-estates/) and the [executor's guide](https://taxnotes.ca/guides/executors-guide/).

## Your property is treated as sold

Just before death, a person is considered to have sold their capital property at fair market value. That includes real estate such as homes and cottages, investments such as stocks, mutual funds and crypto-assets, and belongings such as art, collections and jewellery. Any gain is reported on the final return, even though nothing was sold.

The main ways the tax on those gains can be postponed or reduced:

- property left to a spouse or common-law partner, or to a qualifying spousal trust (below)
- a home that can be designated as the principal residence; see [the principal residence exemption](https://taxnotes.ca/guides/principal-residence-exemption/)
- Canadian farm or fishing property left to a child who was resident in Canada just before the death, if it was used mainly in a farming or fishing business on a regular and ongoing basis by you, your spouse or common-law partner, or your children, and is transferred to the child within 36 months of the death
- gains on qualified small business corporation shares or qualified farm or fishing property that may be sheltered by the [lifetime capital gains exemption](https://taxnotes.ca/guides/lifetime-capital-gains-exemption/)

## Leaving property to a spouse or common-law partner

Property that goes to a surviving spouse or common-law partner who is resident in Canada can pass without a capital gain on the final return. The gain is postponed until the survivor sells the property or is treated as having sold it. To qualify, the property has to become locked in for the survivor within 36 months of the death.

Your will can instead leave property to a testamentary spousal or common-law partner trust, which postpones the gain in the same way if:

- the trust is resident in Canada once the property is locked in for it, and that happens within 36 months of the death
- your spouse or partner is entitled to receive all of the trust's income
- no one else can receive or use any of the trust's income or capital during their lifetime

Your legal representative can instead elect, property by property, to report the gain on your final return.

## RRSPs and RRIFs: name your beneficiaries carefully

For an RRSP that isn't paying a retirement income yet, the general rule is that its full value at death is income on the final return. The same goes for a RRIF. Who receives the plan can change that:

- **Spouse or common-law partner.** If everything in the RRSP goes to your spouse or partner and is transferred directly to their RRSP, RRIF, pooled or specified pension plan, or used to buy them an eligible annuity, by the end of the year after the death, they report it and claim an offsetting deduction instead. With a RRIF, you can elect in the contract or your will to have the payments continue to your spouse or partner as the new annuitant.
- **Financially dependent child or grandchild.** RRSP proceeds paid to a child or grandchild who was financially dependent on you can be used to buy an annuity with payments over no more than 18 years minus their age when it's bought. If they depended on you because of an impairment in physical or mental functions, RRSP or RRIF proceeds can be rolled into their RDSP.
- **Anyone else.** The full value is generally income on your final return, and any growth after the death is taxed to the beneficiary or the estate.

A beneficiary can be named in the plan contract or in your will.

## TFSAs: successor holder or beneficiary

A TFSA can have two kinds of beneficiary, named in the TFSA contract or your will:

- **Successor holder.** Only your spouse or common-law partner can be one. They become the holder as soon as you die, the account carries on, and its value and later earnings stay sheltered. It doesn't use up their own contribution room (unless the account had an excess amount), but they don't get your unused room either.
- **Designated beneficiary.** This can be a family member, another person or an organization: for example a spouse or partner not named as successor holder, a child, a former spouse, or a charity. They receive the value at the date of death tax-free, but later earnings are taxable. A surviving spouse or partner named this way can generally put what they receive into their own TFSA as an exempt contribution that doesn't use their room. A charity generally has to receive the funds within 36 months; your executor can then ask the CRA to change your final return to claim the donation.

With no successor holder or beneficiary, the TFSA goes to your estate and is distributed under your will. To change a designation you made before, contact your TFSA issuer. Quebec doesn't recognize TFSA successor holder designations, or beneficiary designations on deposit and trust TFSAs (annuity contracts are the exception), though a surviving spouse or partner there can still make an exempt contribution. See [TFSA basics](https://taxnotes.ca/guides/tfsa-basics/).

## Estates and testamentary trusts

After a death, the estate is a testamentary trust, and so is a trust created by a will. Most estates qualify as a **graduated rate estate** for up to 36 months after the death. Its income is taxed at the same graduated rates as an individual's, and under certain conditions donations it makes can be claimed in several years, including on the final return. Once that period ends, and for other trusts, the trust's taxable income is taxed at the top federal rate for individuals (33% for 2025). The exception is a qualified disability trust, a testamentary trust that elects with beneficiaries eligible for the disability tax credit, which is also taxed at graduated rates.

## Gifts while you're alive

Giving property away now doesn't avoid the tax. If you give capital property as a gift, you're treated as having sold it at fair market value, and you report any gain that year. Selling it for less than it's worth to someone you don't deal with at arm's length, such as a relative, has the same result.

Gifts to a spouse or common-law partner are different: they generally pass at your cost, so there's no gain until they sell. But if they sell during your lifetime while you're still together and you're resident in Canada, you usually report the gain. Income such as interest or dividends from property you give or lend to your spouse or partner, or to a related minor under 18 (including a niece or nephew), may also have to be reported by you.

## Wills and probate

The Government of Canada calls a will the easiest and most effective way to say how your property should be distributed, and the executor it names is usually the person who deals with the CRA. Without one, someone may need to apply to the courts to administer the estate, and your survivors may wait longer and need a lawyer.

Probate, and any fees for it, falls under provincial and territorial law, not the CRA. Check the rules where you live.

## What to do

- Make a will, name an executor, and update both when your life changes.
- Review the beneficiaries on every RRSP, RRIF and TFSA, and consider naming your spouse or partner as TFSA successor holder.
- Keep records of what you paid for property, so your executor can work out the gains.
- If you own a business, farm or rental property, get professional advice.

## Sources

1. [Taxable capital gains on property, investments, and belongings (someone who died)](https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/prepare-returns/report-income/capital-gains.html) (canada.ca)
2. [RRSP (someone who died)](https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/prepare-returns/report-income/rrsp.html) (canada.ca)
3. [RRIF (someone who died)](https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/prepare-returns/report-income/rrif.html) (canada.ca)
4. [RC4177, Death of an RRSP Annuitant](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4177/death-rrsp-annuitant-a-prpp-member.html) (canada.ca)
5. [What happens when a TFSA holder dies](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/death-of-holder/what-happens.html) (canada.ca)
6. [If you are a successor holder of a TFSA](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/death-of-holder/successor-holder.html) (canada.ca)
7. [If you are a designated beneficiary of a TFSA](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/death-of-holder/beneficiary.html) (canada.ca)
8. [What returns you need to file (someone who died)](https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/prepare-returns/what-to-file.html) (canada.ca)
9. [T3 Trust Guide – 2025](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4013/t3-trust-guide.html) (canada.ca)
10. [Guide T4037, Capital Gains – 2025](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037/capital-gains.html) (canada.ca)
11. [Federal Income Tax and Benefit Information for 2025 (loans and transfers of property)](https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package/5000-g.html) (canada.ca)
12. [Guide T4002, Chapter 6 – Capital gains (transfer of farm or fishing property to a child)](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4002/t4002-9.html) (canada.ca)
13. [Represent someone who died](https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/represent-deceased.html) (canada.ca)
14. [What to do when someone dies: Prepare for end of life](https://www.canada.ca/en/services/life-events/death/prepare.html) (canada.ca)
15. [What to do when someone dies: Estates and wills](https://www.canada.ca/en/services/life-events/death/estates-wills.html) (canada.ca)

Tax figures in this guide come from the TaxNotes.ca rates tables (https://taxnotes.ca/rates/), which cite the Canada Revenue Agency and, for Quebec, Revenu Québec.

Last reviewed: October 11, 2026

How to cite: "Estate planning: the tax side", TaxNotes.ca, last reviewed 2026-10-11, https://taxnotes.ca/guides/estate-planning/. For a figure or rule, also cite the official source listed above.

Licence: CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). Free to share and adapt with attribution: https://taxnotes.ca/reproducing-our-content/