Intestate Common-Law Ontario 2026: Lump Sum vs Installment vs Deferral \u2014 Which Saves More on $450K?

The Scenario: $450K Estate, Common-Law Partner, No Will, Mississauga

A 62-year-old Mississauga man dies in 2026. He and his partner lived together for 8 years but never married and never signed a will. Estate composition: $200,000 RRSP, $150,000 in home equity (held as joint tenants with right of survivorship), and $100,000 in a non-registered investment account (ACB $70,000). Surviving partner is 58. For the full framework on how Canada taxes estates at death — deemed disposition, probate, and RRIF income tax — see our inheritance tax Canada 2026 complete guide.

The surviving partner faces two separate legal systems pulling in opposite directions. Ontario's estate law says: you get nothing. CRA's tax rules say: you're a spouse. Understanding this gap — and how to exploit the CRA definition while navigating around the provincial one — is the entire game on a $450K intestate common-law estate.

The Legal Gap: Ontario Intestacy vs CRA Spouse Definition

Under Ontario's Succession Law Reform Act (SLRA, Part II, s. 44–49), intestacy distribution does not include common-law partners. Period. The estate passes to children first, then parents, then siblings. A common-law partner of 20 years gets the same as a stranger: nothing.

But the CRA operates on a different definition. Under ITA s. 248(1), a “common-law partner” is someone who has cohabited in a conjugal relationship for at least 12 continuous months. After that threshold, the CRA treats you identically to a married spouse for every tax purpose — including the spousal RRSP rollover under ITA s. 60(l), the spousal TFSA successor holder designation, and the deemed-disposition deferral under ITA s. 70(6).

Three Strategies for the $200K RRSP: Side-by-Side Comparison

The RRSP is the tax-sensitive asset in this estate. The home passes automatically via joint tenancy (no tax, no probate). The non-registered account triggers a modest capital gain regardless of strategy. The RRSP is where the decision matters — and where the three strategies diverge by up to $47,620.

Strategy A: Lump-Sum RRSP Collapse (The Worst-Case Default)

If there's no beneficiary designation on the RRSP and no will, the RRSP collapses into the estate. The full $200,000 is reported as income on the deceased's terminal T1 return. Combined with any other income earned in the year of death, this pushes the terminal return into Ontario's higher brackets.

Worse: without a beneficiary designation, the RRSP proceeds fall into the estate and are subject to Ontario's intestacy rules. The surviving common-law partner gets nothing. The $200K (minus $53,530 in tax) goes to the deceased's blood relatives. The partner just lost $146,470 because a $50 form was never filed.

Strategy B: Successor Annuitant — Installments Over 3 Years

If the surviving common-law partner is named as successor annuitant on the RRSP, the plan continues in the survivor's name. No tax on the terminal return. The survivor then withdraws strategically over multiple years, controlling the marginal rate.

In our scenario, the surviving partner is 58 with roughly $40,000 in annual employment income. Withdrawing ~$67,000/year over 3 years keeps total income around $107,000/year — well below the point where Ontario's highest surtax brackets kick in.

The installment approach is the middle ground: it avoids the lump-sum tax spike while still giving the survivor access to the funds within a few years. It requires the successor annuitant designation — not just a beneficiary designation. The difference matters: a beneficiary receives a lump sum (though they can contribute it to their own RRSP if room exists), while a successor annuitant continues the plan.

Strategy C: Full Spousal Rollover — $0 Tax Now

The spousal rollover under ITA s. 60(l) is the most powerful option. The RRSP transfers directly to the surviving partner's own RRSP. No income inclusion on the terminal return. No tax. No probate.

The catch: the tax isn't eliminated, it's deferred. The $200K will eventually be taxed when the survivor withdraws it or when the survivor dies. But time-value-of-money works in the survivor's favour: $53,530 invested for 15 years at even 5% nominal grows to ~$111,000. Deferral is the next best thing to elimination.

The Full Estate Picture: All Assets, All Strategies

The Recommendation: Pick Strategy C, Fall Back to B

The Probate Layer: Why Beneficiary Designations Save Twice

Ontario's Estate Administration Tax is $0 on the first $50,000, then $15 per $1,000 above that (effectively 1.5%). On a $450K estate where everything goes through probate, the fee is: ($450,000 − $50,000) × $15/$1,000 = $6,000.

But assets with beneficiary designations bypass probate entirely. In our scenario:

• • $200K RRSP with named beneficiary → bypasses probate
• • $150K home in joint tenancy with right of survivorship → bypasses probate
• • $100K non-registered (no designation available) → goes through probate

With designations in place: probate drops from $6,000 to $750 — only the non-registered account passes through the will. The beneficiary designation saves twice: once on tax (the spousal rollover), and again on probate (bypassing the estate).

What Canada Calls “Estate Tax” vs What the US and UK Actually Charge

If you're searching “estate on 2026,” most results explain the US federal estate tax: up to 40% on estates over $15M per individual, raised permanently by the One Big Beautiful Bill Act. A $450K US estate pays $0 in federal estate tax. The UK charges 40% inheritance tax above £325,000 (nil-rate band frozen until April 2031).

Canada has no formal estate or inheritance tax. But the combination of deemed disposition on registered accounts, capital gains on non-registered assets, and provincial probate fees produces effective tax rates of 20–53% depending on estate composition. On our $450K common-law intestate estate, the effective rate ranges from 1.1% (rollover) to 14.2% (lump sum) — driven almost entirely by how the RRSP is handled.

The Executor's Checklist: Common-Law Intestate in Ontario

The $50 Fix That Prevents a $58,780 Problem

A beneficiary designation form costs nothing. Most banks and brokerages have it available online or at the branch. Filing it takes 10 minutes. On a $450K common-law estate in Ontario, that single form is the difference between a $5,100 total estate cost and a $63,880 total estate cost.

But the form isn't enough by itself. Common-law couples in Ontario should also:

• • Sign a will. Ontario's intestacy rules exclude common-law partners. A simple will costs $500–$1,500 and solves the problem completely.
• • Confirm joint tenancy on the home. Tenancy in common doesn't pass automatically — the deceased's share goes through the estate.
• • Name a successor annuitant (not just a beneficiary) on the RRSP. A successor annuitant continues the plan tax-free. A beneficiary receives a lump sum that may trigger partial tax if RRSP room isn't available.

The total cost of these three measures: under $2,000. The cost of skipping them: $58,780 on a $450K estate — plus the risk that the surviving partner inherits nothing at all under Ontario intestacy.