2026 Inheritance Tax Law Changes: What Ontario Families Need to Know
Key Takeaways
- 1Understanding 2026 inheritance tax law changes: what ontario families need to know is crucial for financial success
- 2Professional guidance can save thousands in taxes and fees
- 3Early planning leads to better outcomes
- 4GTA residents have unique considerations for inheritance planning
- 5Taking action now prevents costly mistakes later
Quick Summary
This article covers 5 key points about key takeaways, providing essential insights for informed decision-making.
When the Thompson family lost their father in late 2025, they expected a straightforward inheritance. Instead, they faced a $180,000 tax bill—$120,000 from RRSP income inclusion and $60,000 from capital gains on investment properties. With proper planning, this could have been reduced by 60%. As 2026 brings updated thresholds and rules, understanding the landscape is essential for protecting family wealth.
Canada's "Hidden" Inheritance Tax
While Canada has no direct inheritance tax, the combination of probate fees, deemed disposition rules, and RRSP/RRIF income inclusion can claim 30-50% of estate value without proper planning. Understanding these mechanisms is the first step to protection.
2026 Estate Tax Landscape in Ontario
Probate Fees (Estate Administration Tax)
2026 Ontario Probate Fee Structure:
- •First $50,000: $5 per $1,000 ($250 maximum)
- •Amount over $50,000: $15 per $1,000 (1.5%)
Example Calculations:
- $500,000 estate: $250 + ($450,000 × $15/1000) = $7,000
- $1,000,000 estate: $250 + ($950,000 × $15/1000) = $14,500
- $2,000,000 estate: $250 + ($1,950,000 × $15/1000) = $29,500
Capital Gains on Deemed Disposition
The 2026 capital gains inclusion rate creates two tiers:
- •First $250,000 of capital gains: 50% inclusion rate
- •Capital gains above $250,000: 66.67% inclusion rate
Example: $400,000 Capital Gain on Investment Property
- First $250,000: $125,000 taxable (50%)
- Remaining $150,000: $100,000 taxable (66.67%)
- Total taxable gain: $225,000
- Approximate tax at 50% marginal rate: $112,500
RRSP/RRIF Income Inclusion
Registered accounts face the harshest treatment on death:
- Full RRSP/RRIF value included as income on final return
- Taxed at deceased's marginal rate (often 50%+ for large accounts)
- Exception: tax-free rollover to spouse, common-law partner, or dependent child/grandchild
- Named beneficiaries receive funds quickly but estate pays the tax
Warning: The RRSP Tax Trap
A $600,000 RRSP with no surviving spouse can generate over $300,000 in taxes. Many families are shocked when "tax-free" growth accounts face full taxation on death. Strategic RRSP drawdown during retirement can significantly reduce this burden.
2026 Estate Planning Strategies
1. Maximize Beneficiary Designations
Assets with named beneficiaries bypass probate entirely:
💡 Have questions about your specific situation?
Get Free Expert AdviceEligible Accounts for Beneficiary Designation:
- ✓RRSPs and RRIFs (spouse = tax-free rollover)
- ✓TFSAs (successor holder = keeps account; beneficiary = funds paid out)
- ✓Life insurance policies
- ✓Segregated funds (insurance products)
- ✓Pension and employer benefit plans
2. Joint Ownership Strategy
Joint tenancy with right of survivorship (JTWROS) passes property directly:
- Bank accounts: Easy to establish, immediate access for survivor
- Real estate: Bypasses probate but consider capital gains implications
- Investment accounts: JTWROS available at most institutions
Caution: Joint Ownership Risks
Adding children to property titles can trigger capital gains (loss of principal residence exemption for that portion), expose assets to children's creditors or divorce, and create attribution rule issues. Consult a professional before implementing.
3. Multiple Wills Strategy
Ontario recognizes multiple wills—one for probate assets, another for assets not requiring probate:
Primary Will (Probated):
- • Real estate (except jointly held)
- • Publicly traded securities
- • Bank accounts in sole name
- • Assets requiring third-party verification
Secondary Will (Not Probated):
- • Private company shares
- • Personal effects and household items
- • Shareholder loans
- • Assets where executor can transfer without probate
4. Alter Ego and Joint Partner Trusts
For individuals 65+, these trusts offer significant planning opportunities:
- Assets transferred to trust bypass probate on death
- Settlor maintains control during lifetime
- Privacy benefits—trust assets not public record
- Incapacity planning built in
- Tax-neutral transfer if properly structured
2026 Action Items for Ontario Families
Estate Planning Checklist for 2026:
- □Review and update all beneficiary designations
- □Calculate potential deemed disposition taxes
- □Assess RRSP/RRIF drawdown strategy for tax efficiency
- □Consider multiple wills if you own private company shares
- □Evaluate alter ego trust benefits if 65+
- □Update Power of Attorney and healthcare directives
- □Review life insurance beneficiaries and coverage
Protect Your Family's Inheritance in 2026
Our estate planning specialists help GTA families navigate the complex intersection of probate, capital gains, and income tax rules. Start the year with a comprehensive estate plan that minimizes taxes and protects your legacy.
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