Are you wondering how long it takes to receive an inheritance from a will in Canada? Inheriting property or money from a loved one is often bittersweet and the drawn-out process of receiving your inheritance can be stressful and complicated. Join us as we explore what happens when left an inheritance in Canada and how long it might take before you’re able to start using your funds. From tracking down executors and understanding probate laws, read on for answers to all your questions about inheriting assets!
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What happens when you receive an inheritance?
Receiving an inheritance from a will can be an exciting and sometimes unexpected experience! Depending on the estate, it might mean you receive a large sum of money, property inheritance, or both. It’s important to consider your inheritance thoughtfully and make a plan before you proceed further.
Usually the best first step is to contact the executor or lawyer that handled the settlement of the estate to discuss legal implications, taxes and other details. In many cases, the executor or lawyer may contact you. Especially if you were unaware you were named in a will before the individual’s death. If the deceased individual left a valid, legal will, the estate distributes accordingly to the final wishes of the deceased in the will. On the other hand, if the deceased did not leave a legal will, the estate will be dealt with according to provincial or territorial law. Unfortunately, this varies depending on where you live.
Part of the inheritance distribution process is taxes. Unfortunately, death and taxes are unavoidable! In any circumstance, the deceased must file a final tax return and settle any tax debt from the estate. Thankfully, individuals do not have to pay taxes on their inheritance. Rather, tax settles in the deceased’s hands, then passes onto the heirs tax free.
Once you have a better understanding of your inheritance, you may need to think of ways to make use of it while still sticking to your financial goals. You may decide to save it for future needs or use it in a way that benefits others, or yourself! The bottom line is to take some time and carefully think over all avenues. Receiving an inheritance can open up multiple possibilities but remember not every decision has a right answer.
Related Reading: Estate Planning in Canada
How does probate work in Canada?
In some cases, inheritance must go through probate in Canada. Probate is the process of validating a will. Sometimes, financial institutions are unable to verify if a will was challenged, revoked or superseded by another legal document. Since banks don’t have their own internal process of verifying wills, it goes through probate. This is to ensure money, investments and other assets held by banks pass onto the correct individual when the original owner dies.
Probate is a legal proceeding which happens in a court of law. By the end of the process, the will becomes the official, true last will and testament of the deceased. In some circumstances, challenges to the will occur during the probate process. For instance, if the will was written days before death, an argument may be made the individual wasn’t in an appropriate state to prepare a will. If a contention of a will happens, the courts determine the best course of action for the deceased’s assets according to local law.
After acceptance of the will, the next step is to determine if the executor is still willing and able to serve. In some instances, the individual is unsuitable and appointment of another individual occurs. The chosen executor receives a formal “Grant of Administration.” This essentially means the will and executor are final. Then, distribution of assets begins.
Keep in mind that probate costs money in Canada. The cost varies depending on what province or territory you reside in. In most places, probate costs are based on the total value of the estate. Some individuals choose to pass on their assets to their loved ones before death to reduce or eliminate the cost of probate.
Related Reading: How Inheritance Works in Canada
How long to get inheritance from a will?
The prospect of inheritance from a will is always filled with excitement, but the reality is it can take months, sometimes years, until you actually receive it. This can happen due to any number of factors. Such as complexities with the will or assets, waiting for probate to be carried out, finalizing the deceased’s tax return, and other issues related to inheritance. If a large inheritance is involved there may also need to be accounting undertaken so the actual funds available can be finalized. All in all, patience is key when it comes to inheritance from a will and it’s best not to make grand plans until you have your inheritance safely in the bank.
How is inheritance divided in Canada?
Division of an inheritance follows the will, or better yet, the wishes of the deceased. If there is no will, division of the estate occurs through provincial or territorial law. Unfortunately, death can bring about ugliness within families, especially if someone thought they were receiving an inheritance but didn’t. In these circumstances, a family member or friend may attest the will in order to obtain an inheritance they believe they’re entitled to.
But with all that aside, inheritances most commonly go to the following persons:
- Spouse or life long partner
- Children
- Closest next-of-kin
- Family members
- Close friend
- Charities as a bequest
Related Reading: Is inheritance money split in a divorce in Canada?
Is money inherited from a will taxable?
In Canada, inheritances are not taxable in the hands of the beneficiary. In other words, inheritances are tax-free!
Although, this was not always the case. On January 1, 1972, a repeal of federal estate and gift taxes occurred. But prior to this, individuals did need to pay tax on their inheritances. Unfortunately, this was replaced with capital gains tax which included laws surrounding deemed dispositions. If someone passes away, all property falls under a deemed disposition. A deemed disposition means property is deemed as disposed, even if it isn’t in actuality. In terms of taxes, a deemed disposition means the taxpayer must pay capital gains tax on the difference between the current market value and the original purchase price. Deemed dispositions occur in the hands of the deceased taxpayer, not the heir. However, this is important to keep in mind because deemed dispositions can reduce the value of inherited assets significantly.
Does an inheritance count as income?
To reiterate, inheritances are taxable in the hands of the deceased. When someone dies, they must file a final tax return. Often, taxes owed come out of the estate. Once this process is complete, the inheritance passes onto the beneficiaries. The final amount of the inheritance can differ depending on how much remains after taxes.
Do beneficiaries pay tax on inheritance in Canada?
No, beneficiaries do not pay tax on inheritances. All tax is settled with the deceased’s final tax return, then the assets are distributed.
Related Reading: Trust Return Guide
Managing an inheritance from a will
If you’re the lucky beneficiary of a will in Canada, it might take a while to actually receive your inheritance. Due to the complex process involving many parties, receiving an inheritance from a will can take months, sometimes even years. But if you’re patient, eventually you’ll get what’s coming to you. In the meantime, think about what you will do with your inheritance and how you can put the wealth to good use!
Read More: Will Planning Guide Canada