Canadian Inheritance Tax for Common-Law Partners: How $500,000 Is Treated Differently Than a Married Spouse in 2026

The Two-System Problem: Federal Tax Law vs. Provincial Inheritance Law

Canada does not have a formal inheritance tax. But when someone dies, the federal Income Tax Act triggers a deemed disposition of all capital property at fair market value, and includes the full value of registered accounts (RRSPs, RRIFs) in the deceased's final income. The spousal rollover — which defers all of this tax until the surviving spouse dies — is available to both married spouses and common-law partners under federal tax law.

So far, so equal. The problem is that provincial inheritance law does not follow the same definition. When a common-law partner dies without a will in Ontario, the provincial Succession Law Reform Act does not recognize the surviving partner as a spouse. The estate passes to blood relatives. The RRSP — if it names the estate as beneficiary rather than the partner directly — follows the estate, not the partner. And when the RRSP goes to someone who is not a spouse or common-law partner, the spousal rollover is denied. For a broader look at how inheritance is taxed in Canada, see our complete guide to inheritance tax in Canada.

Who Qualifies as a Common-Law Partner? Two Definitions, Two Outcomes

The federal Income Tax Act (subsection 248(1)) defines a common-law partner as a person who has been living with you in a conjugal relationship for at least 12 continuous months, or who is the parent of your child by birth or adoption. This definition applies uniformly across Canada for all federal tax purposes — including the spousal rollover on RRSPs, RRIFs, TFSAs, and capital property.

Provincial family and estate law uses different definitions — and more importantly, grants different rights:

The practical consequence: a common-law couple in Ontario who has lived together for 15 years, raised children together, and files taxes as common-law partners with the CRA — that couple has zero inheritance rights under Ontario intestacy law. Move the same couple to BC, and the surviving partner inherits as a spouse. For more on how this gap affects Ontario common-law partners specifically, see our detailed analysis of common-law inheritance in Ontario.

Worked Example: $500,000 RRSP and $300,000 Non-Registered Portfolio

Let's work through the tax math on two scenarios: one where the spousal rollover succeeds, and one where it is denied. The facts are the same — only the beneficiary designations and the will change.

The Facts

• Deceased: age 62, Ontario resident, common-law partner for 8 years
• RRSP: $500,000 fair market value
• Non-registered investment portfolio: $300,000 FMV, adjusted cost base $120,000 (unrealized gain of $180,000)
• No other significant assets (the family home is rented)
• Top combined Ontario marginal tax rate: 53.53%
• 2026 capital gains inclusion rate: 66.67% on gains above $250,000

Scenario A: Rollover Succeeds (Partner Named as Beneficiary, Will in Place)

The RRSP rolls tax-free to the surviving common-law partner's own RRSP (or RRIF) because the partner is named as successor annuitant. The non-registered portfolio transfers at the deceased's adjusted cost base under the subsection 70(6) spousal rollover, deferring the $180,000 capital gain until the survivor sells. Total tax at death: zero. For a deeper dive into how spousal rollovers work, see our guide to spousal rollover rules in Canada.

Scenario B: Rollover Denied (No Beneficiary Designation, No Will, Ontario Intestacy)

The difference between Scenario A and Scenario B is $315,824 in immediate tax — triggered not by any difference in the relationship, but by the absence of a beneficiary designation and a will. The surviving common-law partner receives nothing under Ontario intestacy, the estate pays $315,824 to the CRA, and the remaining assets go to the deceased's next of kin.

Why the Rollover Fails: The Executor's Problem

The subsection 70(6) spousal rollover for capital property and the RRSP rollover under subsection 60(l) both require that the property or registered account proceeds pass to a spouse or common-law partner. The CRA does not care whether you are married or common-law — if you meet the 12-month cohabitation test, you qualify. So why does the rollover fail?

It fails because of where the assets go, not who the couple is:

1. RRSP with no beneficiary designation: The RRSP proceeds are paid to the estate. The estate is distributed under the will, or under intestacy if there is no will. In Ontario, intestacy excludes the common-law partner. The RRSP goes to blood relatives. Since it does not pass to a spouse or common-law partner, no rollover.
2. Non-registered portfolio with no will: The portfolio is part of the estate. Under Ontario intestacy, it goes to children, parents, or siblings — not the common-law partner. Since the property does not transfer to a spouse, the subsection 70(6) rollover does not apply, and the deemed disposition triggers immediate capital gains tax.
3. Will that names the partner: If the deceased had a valid will leaving assets to the common-law partner, the rollover would apply — because the assets are passing to a qualifying person. The rollover depends on the destination of the assets, not just the status of the relationship.

Provincial Intestacy Comparison: Ontario vs. BC vs. Alberta

The outcome for a surviving common-law partner depends entirely on which province they live in when their partner dies. Here is how the same $800,000 estate ($500,000 RRSP + $300,000 portfolio) is treated under intestacy in three provinces:

Ontario: Common-Law Partner Gets Nothing

Ontario's Succession Law Reform Act defines "spouse" for intestacy purposes as a person married to the deceased. Common-law partners — regardless of relationship duration — are excluded. The $800,000 estate passes to children first, then parents, then siblings. The surviving common-law partner may pursue a dependant's relief claim under Part V of the Succession Law Reform Act or an unjust enrichment claim, but both require litigation, take 12–24 months, and have uncertain outcomes.

British Columbia: Common-Law Partner Inherits as Spouse

BC's Wills, Estates and Succession Act (WESA) treats common-law partners who have lived together in a marriage-like relationship for at least 2 years as spouses for all estate purposes — including intestacy. The surviving partner inherits the first $300,000 of the estate plus 50% of the remainder (if the deceased had children) or 100% (if no children). The RRSP rolls over tax-free. The capital property transfers at ACB. Tax at death: approximately zero.

Alberta: Adult Interdependent Partners Have Limited Rights

Alberta's Wills and Succession Act recognizes adult interdependent partners — defined as people who have lived together in a relationship of interdependence for at least 3 years, or who have entered an adult interdependent partner agreement. Adult interdependent partners are treated as spouses for intestacy purposes and receive the same inheritance rights as married spouses. However, Alberta does not grant automatic property division rights, so the surviving partner's claim is limited to what passes through the estate.

The Beneficiary Designation: The Single Most Important Document

For common-law partners, the beneficiary designation on registered accounts is more important than the will. Here is why:

• A beneficiary designation is a contractual instruction to the financial institution. It operates outside the estate and outside the will.
• Provincial intestacy rules cannot override a valid beneficiary designation. Even in Ontario, where common-law partners have zero intestacy rights, an RRSP beneficiary designation in favour of the common-law partner will be honoured.
• The RRSP proceeds flow directly to the named beneficiary, bypassing probate, bypassing the estate, and bypassing creditors of the estate.
• The successor annuitant designation (available on RRSPs and RRIFs) is even stronger — it allows the surviving partner to continue the plan in their own name without any deemed disposition or withdrawal.

Five Steps to Close the Common-Law Inheritance Gap

The gap between common-law and married partners at death is real — but it is entirely closable with planning. These five steps, in order of priority, eliminate most of the risk:

1. Name your common-law partner as beneficiary or successor annuitant on all registered accounts. This is the single highest-impact action. It ensures the RRSP, RRIF, and TFSA bypass the estate and provincial intestacy rules entirely. Cost: $0 (a phone call or online form with your financial institution).
2. Execute mutual wills naming each other as primary beneficiaries. A will that specifically names the common-law partner as the residual beneficiary ensures that non-registered assets — the $300,000 portfolio, personal property, and any other assets — pass to the partner and qualify for the spousal rollover. In Ontario, this is the only way to direct the estate to a common-law partner. Cost: $1,500–$3,000 for a pair of well-drafted wills.
3. Sign a cohabitation agreement that documents the relationship. A cohabitation agreement serves two purposes: it provides evidence of the common-law relationship (useful if the CRA or an insurer challenges the partner's status), and it can include mutual commitments regarding wills, beneficiary designations, and property sharing. Cost: $2,000–$5,000.
4. Consider joint ownership with right of survivorship for non-registered accounts. Joint ownership with JTWROS allows assets to pass directly to the surviving joint owner at death, outside the estate. This provides a backup if the will is challenged or delayed in probate. However, joint ownership has tax implications during life (attribution rules, capital gains on half the asset) and may not be appropriate for all situations.
5. Review and update every 2 years. Beneficiary designations, wills, and cohabitation agreements must be reviewed when circumstances change — new children, new assets, a move to a different province (which changes the intestacy rules), or a change in the relationship. A designation that named an ex-partner is still valid until replaced. For a comprehensive estate planning review process, see our estate planning checklist for Ontario.