Executor Settling a $5M Estate in ON (2026): Probate Fees, Deemed Disposition, and the Executor's Tax Checklist
Quick Answer
As executor of a $5M Ontario estate with private company shares in 2026, you're managing three major tax levers simultaneously: the Lifetime Capital Gains Exemption (LCGE) of ~$1.25M on qualifying small business corporation (QSBC) shares under section 110.6 of the ITA, the spousal rollover under section 70(6), and the secondary will strategy that can save $22,500 in Ontario probate fees on the $1.5M in private shares alone. Without planning, this estate faces $74,250 in probate fees, $550,000–$640,000 in income and capital gains tax on the terminal return, and an effective government take of 12–14%. The business-share bequest is the single most complex element — the shares must satisfy the QSBC tests at the date of death, the LCGE can only be claimed on the deceased's terminal return (not the heir's), and a failed qualification turns $1.5M of potentially sheltered gains into a $400,000+ tax bill. Your job as executor: confirm QSBC status, determine whether the secondary will was executed, file the terminal T1 within six months of death, and apply for the Certificate of Appointment of Estate Trustee.
Key Takeaways
- 1Ontario's Estate Administration Tax on a $5M estate is $74,250 — calculated as $0 on the first $50,000 plus $15 per $1,000 on the remaining $4,950,000. A secondary will for the private company shares removes $1.5M from the probatable estate, dropping the fee to $51,750 — a $22,500 saving.
- 2The Lifetime Capital Gains Exemption (LCGE) on qualifying small business corporation shares is approximately $1.25M in 2026 (indexed annually). If the deceased never used it during their lifetime, up to $1.25M of capital gains on QSBC shares can be sheltered on the terminal return — saving roughly $334,000 at Ontario's top combined rate of 53.53%.
- 3QSBC qualification requires three tests at the date of death: (1) 90%+ of corporate assets used in active business, (2) 50%+ active-business assets for the prior 24 months, and (3) shares held by the deceased (not a holdco) for 24+ months. A failed test means no LCGE — the entire gain is taxable at 50% inclusion.
- 4The $1.2M RRSP collapses into income on the terminal return under section 146(8.8) unless a surviving spouse receives it. Without a spouse, the RRSP alone generates roughly $560,000–$610,000 in tax at the top combined rate of 53.53%.
- 5Capital gains inclusion in 2026 is a flat 50% for all individuals — the proposed 66.67% rate above $250K was cancelled March 21, 2025 by the Carney government. Do not use the old tiered rate in any filed return.
- 6The spousal rollover under section 70(6) defers tax on capital property and under section 60(l) defers the RRSP income inclusion — but the LCGE cannot be used on rolled-over shares. If the shares roll to a spouse, the LCGE opportunity is deferred to the spouse's eventual disposition.
- 7The principal residence exemption under s. 40(2)(b) eliminates capital gains on the $1.5M family home. On $1M of accrued gain, this saves over $267,000 of tax. File Form T2091 on the terminal return.
- 8Executor compensation in Ontario follows the 2.5% guideline — on a $5M estate, that is roughly $125,000 before tax. It's taxable income to the executor.
A $5M Ontario Estate With Business Shares: Why the LCGE Is the $334K Decision
If you've been named executor of a $5 million Ontario estate that includes private company shares, the tax picture is materially different from a straightforward home-plus-RRSP estate. Canada eliminated its formal estate tax in 1972, but three mechanisms collectively extract 10–50%+ of most estates:
- Ontario Estate Administration Tax (probate fees) — 1.5% on estate value above $50,000
- Deemed disposition at death — capital gains on all non-exempt property, under ITA section 70(5)
- RRSP/RRIF income inclusion — the full account balance collapses into income on the terminal return, under ITA section 146(8.8)
But on this estate, there's a fourth lever that most executors don't know they control: the Lifetime Capital Gains Exemption (LCGE) under section 110.6 of the ITA, which can shelter up to ~$1.25M of capital gains on qualifying small business corporation (QSBC) shares — saving roughly $334,000 at Ontario's top combined rate. Here's the full breakdown on a $5M estate composed of a $1.5M principal residence, $1.5M in private company shares, a $1.2M RRSP, $500K in non-registered investments, and $300K in TFSAs.
Step 1: Ontario Probate Fees on $5M — $74,250 (Before the Secondary Will)
Ontario's Estate Administration Tax applies to the gross value of assets passing through the will. It does not reduce for debts, mortgages, or liabilities. The rate:
Ontario Estate Administration Tax Schedule (2026)
| Estate Value | Rate |
|---|---|
| First $50,000 | $0 (no fee) |
| Above $50,000 | $15 per $1,000 (1.5%) |
On a $5,000,000 estate: ($5,000,000 − $50,000) × $15 / $1,000 = $74,250 in probate fees.
Compare that to other provinces on the same $5M: Alberta charges a flat $525 regardless of estate size. Manitoba charges $0. Quebec with a notarial will: $0. The Ontario-to-Alberta gap on a $5M estate is $73,725 — more than eight years of maximum OAS payments ($8,907.72/year for ages 65–74). For the full provincial breakdown, see our complete probate fee comparison for 2026.
The secondary will lever: Private company shares do not require probate for transfer. A secondary will covering the $1.5M in shares removes them from the probatable estate entirely. The primary will — submitted for probate — covers the remaining $3.5M. Probate fee drops to $51,750, saving $22,500. Add named beneficiaries on the $1.2M RRSP and $300K TFSA (which bypass the estate), and the probatable estate drops to $2M with a fee of $29,250 — a total saving of $44,750.
Step 2: The $1.5M Business Shares — LCGE Qualification Is the Whole Game
Under section 70(5) of the ITA, the $1.5M in private company shares are deemed disposed of at fair market value on the date of death. If the original adjusted cost base (ACB) was $200K, that's a $1.3M capital gain. At 50% inclusion (2026 law — the proposed 66.67% rate above $250K was cancelled March 21, 2025), that's $650,000 of taxable income.
At Ontario's top combined marginal rate of 53.53%, the tax on $650K of capital gains income would be roughly $348,000. But here's where the LCGE changes the math entirely.
Section 110.6 of the ITA — Lifetime Capital Gains Exemption on QSBC shares: If the shares qualify as QSBC and the deceased never used the LCGE during their lifetime, up to ~$1.25M (indexed annually) of capital gains on those shares is fully exempt from tax on the terminal return.
On $1.3M of gain, the LCGE shelters $1.25M — only $50K of gain remains taxable. At 50% inclusion, that's $25K of taxable income. Tax: roughly $13,400 instead of $348,000. The LCGE saves $334,000.
The Three QSBC Tests the Executor Must Verify
The LCGE is only available if the shares meet the QSBC definition under section 248(1) of the ITA. All three tests must pass at the date of death:
Test 1: 90% Active Business Asset Test (at disposition)
At the date of death, 90% or more of the fair market value of the corporation's assets must be used in an active business carried on primarily in Canada. Excess cash, passive investments, or portfolio assets push the ratio below 90%. A corporation sitting on $300K of retained earnings in a GIC against $1.5M of total assets is at 80% active — it fails.
Test 2: 50% Active Business Asset Test (24-month lookback)
Throughout the 24 months before death, more than 50% of the corporation's assets must have been used in active business. This is a lower threshold but a longer window — it catches corporations that were purified shortly before death but had passive assets for years prior.
Test 3: Holding Period (24+ months)
The shares must have been owned by the deceased (or a related person) for at least 24 months before the deemed disposition. Shares held through a holding company do not qualify — they must be held directly by the individual.
A Mississauga bookkeeping-practice owner we've modeled ran into exactly this problem: the corporation had built up retained earnings beyond what active operations required, pushing the asset mix below 90%. The fix was paying a dividend to himself to drop the passive cash — but that restarted the 24-month clock on Test 2. Without that proactive cleanup, the LCGE on his $850K share sale would have been denied, costing roughly $170K in otherwise-sheltered tax. The same risk applies at death — the executor inherits whatever asset mix exists on the date of death. For a deeper dive on LCGE mechanics, see our LCGE business sale guide.
Step 3: The $1.2M RRSP — With vs. Without a Surviving Spouse
The RRSP is the second-largest source of tax on this estate after the business shares (assuming the LCGE fails). The rules fork depending on whether a surviving spouse or common-law partner exists.
No Surviving Spouse: $1.2M Collapses Into Income
Terminal Return — No Spouse, LCGE Claimed on Shares
| Income Source | Amount |
|---|---|
| CPP + OAS + pension (partial year) | $40,000 |
| RRSP deemed income (s. 146(8.8)) | $1,200,000 |
| Capital gains — business shares ($1.3M gain, LCGE shelters $1.25M, 50% inclusion on $50K) | $25,000 |
| Capital gains — non-reg portfolio ($200K gain × 50%) | $100,000 |
| Capital gains — principal residence (s. 40(2)(b) PRE) | $0 |
| Total taxable income on terminal return | $1,365,000 |
At $1,365,000 of taxable income, over $1.1M sits above Ontario's top combined bracket of 53.53% (federal 33% + Ontario 13.16% + surtaxes, applicable above ~$253K). The blended effective tax rate on the full $1,365,000 lands around 48–50%.
Estimated combined federal + Ontario tax on $1,365,000: approximately $640,000–$680,000. Without the LCGE sheltering $1.25M of the business-share gain, add another ~$334,000 — pushing the total toward $1M. For the detailed mechanics of inherited RRSPs, see our inherited RRSP tax rules guide.
With a Surviving Spouse: The Rollover-vs-LCGE Trade-Off
The critical trade-off: The spousal rollover under section 70(6) defers all capital gains tax — but it also defers the LCGE. If the shares roll to the spouse at the deceased's ACB, no gain is triggered, and the deceased's unused LCGE stays unused. The spouse can claim their own LCGE later, but only if the shares still qualify as QSBC at that future date.
The recommended approach on most $5M estates: elect out of the spousal rollover on the business shares under s. 70(6.2) to trigger the gain and claim the LCGE on the terminal return. Roll everything else (RRSP, home, non-registered portfolio) to the spouse. This shelters $1.25M of gain at zero tax while deferring the $1.2M RRSP and other capital gains.
Terminal Return — With Spouse, LCGE Claimed, Everything Else Rolled
| Income Source | Amount |
|---|---|
| CPP + OAS + pension (partial year) | $40,000 |
| RRSP deemed income | $0 (rolled to spouse) |
| Capital gains — business shares (elected out, LCGE claimed) | $25,000 (only $50K above LCGE × 50%) |
| Capital gains — all other property | $0 (rolled to spouse at ACB) |
| Total taxable income on terminal return | $65,000 |
Tax on $65,000 of income: approximately $9,000–$11,000 (after the basic personal amount and age-related credits). Total immediate cost with the secondary will and beneficiary designations: $29,250 probate + ~$10,000 income tax = ~$39,250. Compare that to the no-spouse scenario at $640,000–$680,000+. The combination of spousal rollover on non-business assets plus LCGE on business shares is the optimal play on almost every $5M estate with QSBC shares.
The Principal Residence Exemption — $267K+ of Tax Saved
Under section 70(5), the $1.5M family home purchased for $500K triggers a $1M capital gain on deemed disposition. At 50% inclusion and Ontario's top rate of 53.53%, the tax would be roughly $267,000.
Section 40(2)(b) of the ITA eliminates the capital gain on a property designated as the deceased's principal residence for each year of ownership. If the home was their only property and they lived in it for the full ownership period, the entire $1M gain disappears. Tax saved: ~$267,000. The executor must file Form T2091 on the terminal return — this is not automatic.
The Full $5M Estate Tax Picture: Three Scenarios
$5M Ontario Estate — Side-by-Side Comparison
Composition: $1.5M home ($500K ACB), $1.5M QSBC shares ($200K ACB), $1.2M RRSP, $500K non-reg ($200K accrued gain), $300K TFSA
| Cost | No Spouse, LCGE | No Spouse, No LCGE | Spouse + LCGE (Optimal) |
|---|---|---|---|
| Ontario probate (with secondary will + beneficiary designations) | $29,250 | $29,250 | $29,250 |
| RRSP income tax | ~$560,000 | ~$560,000 | $0 (deferred) |
| Capital gains — business shares | ~$13,400 | ~$348,000 | ~$13,400 |
| Capital gains — home (PRE) | $0 | $0 | $0 |
| Capital gains — non-reg portfolio | ~$53,000 | ~$53,000 | $0 (deferred) |
| TFSA | $0 | $0 | $0 |
| Total immediate government take | ~$655,000 | ~$990,000 | ~$42,650 |
| Effective rate | ~13% | ~20% | ~0.9% |
The difference between the worst case (no spouse, no LCGE) and the best case (spouse + LCGE + secondary will + beneficiary designations) is nearly $950,000. That's not creative tax planning — it's basic compliance with tools the ITA provides. The LCGE and the secondary will are the two levers unique to business-share estates; the rest is standard spousal-rollover mechanics.
How This Compares to US and UK Estate Taxes
If you searched "estate 2026" and landed here from US-focused results, here's why almost none of that content applies to you. The United States has a formal federal estate tax of up to 40% — but it only kicks in above US$15 million per individual (US$30 million per couple), permanently raised by the One Big Beautiful Bill Act effective 2026 and indexed for inflation starting 2027. A US$5M estate owes zero federal estate tax.
The United Kingdom charges 40% inheritance tax on estates above £325,000 (the nil-rate band), with an additional £175,000 residence nil-rate band where applicable. The threshold freeze has been extended to April 2031 per the November 2025 UK Budget. Canada's system is structurally different: no formal estate tax, but the deemed-disposition and RRSP-collapse mechanics mean a $5M Canadian estate without a surviving spouse can face a higher effective rate than a comparable US estate. With a surviving spouse and proper planning, Canada is one of the most tax-efficient jurisdictions for estate transfers. US-centric estate planning content is irrelevant to your situation as an Ontario executor.
The Executor's Tax Checklist: 14 Steps to Settle a $5M Ontario Estate With Business Shares
Executor Tax Checklist — $5M Ontario Estate With QSBC Shares (2026)
The Estate Freeze: What Should Have Happened at Age 65
If the deceased had executed an estate freeze at age 65 — when the business was worth, say, $900K — the picture at death would look dramatically different. The freeze locks the deceased's share value at the then-FMV and issues new growth shares to the heirs. The gain on death would be on $900K minus the $200K ACB = $700K — fully within the $1.25M LCGE. All appreciation from $900K to $1.5M ($600K) accrues to the heirs' shares, taxable only when they eventually sell.
Without the freeze, the full $1.3M gain at death must be dealt with, and only $1.25M is sheltered by the LCGE. On a $5M estate, the estate freeze is the difference between a clean LCGE claim and a partial one — and on faster-growing businesses, the difference can be six figures. For the mechanics, see our estate freeze guide. A standard rule of thumb: any incorporated business owner over 60 should have evaluated an estate freeze. Most haven't.
Executor Personal Liability: $650K+ of Exposure on a $5M Estate
Under subsection 159(2) of the Income Tax Act, you are personally liable for the deceased's tax obligations if you distribute estate assets before the tax is paid. On a $5M estate without a surviving spouse, the exposure is enormous: if you hand over the home, the investment portfolio, the RRSP payout, and the business shares to the beneficiaries, then CRA assesses $650,000+ on the terminal return, and the estate is empty — you owe that amount personally.
The protection: request a clearance certificate (Form TX19) from CRA before making final distributions. CRA reviews all filed returns and confirms no further tax is owing. On a $5M estate with LCGE claims, expect additional scrutiny — CRA regularly audits QSBC qualification on large LCGE deductions. Budget 6–12 months for the clearance process. For the detailed clearance-certificate mechanics at a smaller scale, see our $2.5M estate executor walkthrough.
Frequently Asked Questions
Q:How much are Ontario probate fees on a $5 million estate in 2026?
A:Ontario's Estate Administration Tax on a $5,000,000 estate is <strong>$74,250</strong>. The calculation: $0 on the first $50,000, then $15 per $1,000 on the remaining $4,950,000 ($15 × 4,950 = $74,250). This fee applies to the gross value of assets passing through the will — debts and mortgages are not deducted. A secondary will for the $1.5M in private company shares removes those shares from the probatable estate, reducing the fee to <strong>$51,750</strong> — a <strong>$22,500 saving</strong>. Additionally, if the $1.2M RRSP and $300K TFSA both have named beneficiaries, the probatable estate drops further to $2M and the fee falls to $29,250. Source: Ontario Estate Administration Tax Act, 1998.
Q:Can the Lifetime Capital Gains Exemption be used on private company shares inherited at death?
A:Yes — but only on the <strong>deceased's terminal T1 return</strong>, not on the heir's return. Under section 110.6 of the Income Tax Act, the LCGE shelters up to approximately <strong>$1.25M</strong> (indexed annually) of capital gains on qualifying small business corporation (QSBC) shares. The shares must satisfy three tests at the date of death: (1) 90%+ of corporate assets used in active business at the time of disposition, (2) 50%+ active-business assets throughout the prior 24 months, and (3) shares held by the individual for at least 24 months. If the deceased never claimed any LCGE during their lifetime, the full ~$1.25M exemption is available. On $1.5M of shares with a $200K adjusted cost base, the $1.25M LCGE eliminates the first $1.25M of the $1.3M gain — only $50K of gain remains taxable. Without LCGE qualification, the full $1.3M gain is subject to 50% inclusion, generating $650K of taxable income and roughly $348,000 of tax.
Q:What is a secondary will and how does it save probate fees on private company shares?
A:A secondary will (also called a "dual will" or "multiple will" strategy) splits estate assets into two wills: a <strong>primary will</strong> covering assets that require probate (real estate, bank accounts, publicly traded securities) and a <strong>secondary will</strong> covering assets that don't — primarily <strong>private company shares</strong>. Ontario courts have upheld this strategy in the <em>Granovsky</em> estate decision and others. The secondary will is not submitted for probate, so the assets it covers are excluded from the Estate Administration Tax calculation. On $1.5M of private company shares, this saves <strong>$22,500</strong> in Ontario probate fees ($15 per $1,000 × 1,500). The secondary will must be drafted by an estate lawyer — it requires specific language to avoid invalidating the primary will.
Q:What happens to a $1.2M RRSP when the account holder dies with no spouse?
A:Under section 146(8.8) of the Income Tax Act, the full fair market value of the RRSP on the date of death is included as income on the deceased's terminal T1 return. With no surviving spouse or common-law partner to receive a tax-deferred rollover, $1,200,000 is added to the deceased's other income for the year. Stacked on top of CPP, OAS, any pension income, and capital gains from deemed disposition of other assets, the total taxable income on a $5M estate terminal return can exceed $1.5M — placing the vast majority in Ontario's top combined federal-provincial marginal rate of <strong>53.53%</strong>. The income tax on the RRSP portion alone typically exceeds <strong>$560,000</strong>. The executor is personally liable under subsection 159(2) of the ITA if they distribute estate assets before ensuring this tax is paid.
Q:Does Canada have an estate tax in 2026?
A:No. Canada eliminated its federal estate tax in 1972. However, three mechanisms create estate costs that function similarly: (1) Ontario's Estate Administration Tax (probate fee) at 1.5% on estate values above $50,000, (2) deemed disposition of capital property at fair market value on death under section 70(5) of the ITA — triggering capital gains tax at 50% inclusion, and (3) full income inclusion of RRSP/RRIF balances on the terminal return under section 146(8.8). Combined, these produce effective tax rates of 10–53% depending on estate composition. By comparison, the United States has a formal federal estate tax of up to 40% on estates exceeding US$15 million per individual (per the One Big Beautiful Bill Act, 2026), and the United Kingdom charges 40% inheritance tax above £325,000 (nil-rate band frozen until April 2031).
Q:How does the spousal rollover interact with the LCGE on business shares?
A:This is one of the most important trade-offs on a $5M estate with QSBC shares. Under section 70(6), the spousal rollover transfers capital property to the surviving spouse at the deceased's adjusted cost base — <strong>no deemed disposition, no capital gains tax</strong>. But this also means <strong>no capital gain is triggered</strong>, which means the deceased's LCGE cannot be used. The LCGE shelters gains only when they're realized. If the shares roll to the spouse, the LCGE opportunity is deferred — the spouse can claim their own LCGE when they eventually dispose of the shares (if the shares still qualify as QSBC at that time). The executor can elect out of the rollover under s. 70(6.2) specifically on the business shares to trigger the gain and claim the LCGE on the terminal return. On $1.5M of shares with $1.3M of embedded gain, electing out to use the LCGE shelters $1.25M and saves roughly <strong>$334,000</strong> of tax. This is almost always the right call unless the spouse's future LCGE is certain.
Q:How long does an executor have to file the terminal tax return in 2026?
A:The terminal T1 return is due by the later of: (a) six months after the date of death, or (b) April 30 of the year following death. If the person died between January 1 and October 31, the deadline is April 30 of the next year. If they died between November 1 and December 31, the deadline is six months from the date of death. Late filing triggers a penalty of 5% of the unpaid balance plus 1% per additional month (up to 12 months). On a $5M estate with a potential $600K+ tax bill, the penalty exposure for a single month of delay is $36,000+. The executor is personally liable for ensuring this return is filed — the obligation exists regardless of whether probate has been granted.
Question: How much are Ontario probate fees on a $5 million estate in 2026?
Answer: Ontario's Estate Administration Tax on a $5,000,000 estate is <strong>$74,250</strong>. The calculation: $0 on the first $50,000, then $15 per $1,000 on the remaining $4,950,000 ($15 × 4,950 = $74,250). This fee applies to the gross value of assets passing through the will — debts and mortgages are not deducted. A secondary will for the $1.5M in private company shares removes those shares from the probatable estate, reducing the fee to <strong>$51,750</strong> — a <strong>$22,500 saving</strong>. Additionally, if the $1.2M RRSP and $300K TFSA both have named beneficiaries, the probatable estate drops further to $2M and the fee falls to $29,250. Source: Ontario Estate Administration Tax Act, 1998.
Question: Can the Lifetime Capital Gains Exemption be used on private company shares inherited at death?
Answer: Yes — but only on the <strong>deceased's terminal T1 return</strong>, not on the heir's return. Under section 110.6 of the Income Tax Act, the LCGE shelters up to approximately <strong>$1.25M</strong> (indexed annually) of capital gains on qualifying small business corporation (QSBC) shares. The shares must satisfy three tests at the date of death: (1) 90%+ of corporate assets used in active business at the time of disposition, (2) 50%+ active-business assets throughout the prior 24 months, and (3) shares held by the individual for at least 24 months. If the deceased never claimed any LCGE during their lifetime, the full ~$1.25M exemption is available. On $1.5M of shares with a $200K adjusted cost base, the $1.25M LCGE eliminates the first $1.25M of the $1.3M gain — only $50K of gain remains taxable. Without LCGE qualification, the full $1.3M gain is subject to 50% inclusion, generating $650K of taxable income and roughly $348,000 of tax.
Question: What is a secondary will and how does it save probate fees on private company shares?
Answer: A secondary will (also called a "dual will" or "multiple will" strategy) splits estate assets into two wills: a <strong>primary will</strong> covering assets that require probate (real estate, bank accounts, publicly traded securities) and a <strong>secondary will</strong> covering assets that don't — primarily <strong>private company shares</strong>. Ontario courts have upheld this strategy in the <em>Granovsky</em> estate decision and others. The secondary will is not submitted for probate, so the assets it covers are excluded from the Estate Administration Tax calculation. On $1.5M of private company shares, this saves <strong>$22,500</strong> in Ontario probate fees ($15 per $1,000 × 1,500). The secondary will must be drafted by an estate lawyer — it requires specific language to avoid invalidating the primary will.
Question: What happens to a $1.2M RRSP when the account holder dies with no spouse?
Answer: Under section 146(8.8) of the Income Tax Act, the full fair market value of the RRSP on the date of death is included as income on the deceased's terminal T1 return. With no surviving spouse or common-law partner to receive a tax-deferred rollover, $1,200,000 is added to the deceased's other income for the year. Stacked on top of CPP, OAS, any pension income, and capital gains from deemed disposition of other assets, the total taxable income on a $5M estate terminal return can exceed $1.5M — placing the vast majority in Ontario's top combined federal-provincial marginal rate of <strong>53.53%</strong>. The income tax on the RRSP portion alone typically exceeds <strong>$560,000</strong>. The executor is personally liable under subsection 159(2) of the ITA if they distribute estate assets before ensuring this tax is paid.
Question: Does Canada have an estate tax in 2026?
Answer: No. Canada eliminated its federal estate tax in 1972. However, three mechanisms create estate costs that function similarly: (1) Ontario's Estate Administration Tax (probate fee) at 1.5% on estate values above $50,000, (2) deemed disposition of capital property at fair market value on death under section 70(5) of the ITA — triggering capital gains tax at 50% inclusion, and (3) full income inclusion of RRSP/RRIF balances on the terminal return under section 146(8.8). Combined, these produce effective tax rates of 10–53% depending on estate composition. By comparison, the United States has a formal federal estate tax of up to 40% on estates exceeding US$15 million per individual (per the One Big Beautiful Bill Act, 2026), and the United Kingdom charges 40% inheritance tax above £325,000 (nil-rate band frozen until April 2031).
Question: How does the spousal rollover interact with the LCGE on business shares?
Answer: This is one of the most important trade-offs on a $5M estate with QSBC shares. Under section 70(6), the spousal rollover transfers capital property to the surviving spouse at the deceased's adjusted cost base — <strong>no deemed disposition, no capital gains tax</strong>. But this also means <strong>no capital gain is triggered</strong>, which means the deceased's LCGE cannot be used. The LCGE shelters gains only when they're realized. If the shares roll to the spouse, the LCGE opportunity is deferred — the spouse can claim their own LCGE when they eventually dispose of the shares (if the shares still qualify as QSBC at that time). The executor can elect out of the rollover under s. 70(6.2) specifically on the business shares to trigger the gain and claim the LCGE on the terminal return. On $1.5M of shares with $1.3M of embedded gain, electing out to use the LCGE shelters $1.25M and saves roughly <strong>$334,000</strong> of tax. This is almost always the right call unless the spouse's future LCGE is certain.
Question: How long does an executor have to file the terminal tax return in 2026?
Answer: The terminal T1 return is due by the later of: (a) six months after the date of death, or (b) April 30 of the year following death. If the person died between January 1 and October 31, the deadline is April 30 of the next year. If they died between November 1 and December 31, the deadline is six months from the date of death. Late filing triggers a penalty of 5% of the unpaid balance plus 1% per additional month (up to 12 months). On a $5M estate with a potential $600K+ tax bill, the penalty exposure for a single month of delay is $36,000+. The executor is personally liable for ensuring this return is filed — the obligation exists regardless of whether probate has been granted.
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