Senior in New Brunswick with $1M: Home Plus Business Shares and Succession Planning in 2026

The Estate: $1M in Three Pieces — and Only One Matters for Tax

This New Brunswick senior is 72, widowed, with two adult children. The estate is worth $1M total, split across three asset types that behave very differently at death:

The home pays zero tax thanks to the principal residence exemption under section 40(2)(b) of the Income Tax Act. The non-registered portfolio adds a modest $30,000 capital gain. The business shares — $350,000 in embedded gains — are the entire planning problem. Everything in this article revolves around how and when that $350K gain gets taxed.

New Brunswick Probate: $5,000 on $1M — Not the Main Event

New Brunswick charges a flat $5 per $1,000 on the full estate value passing through the will. No threshold, no tiered brackets — straightforward arithmetic. On $1M, that is exactly $5,000.

Compared to the rest of the country:

New Brunswick sits in the middle of the pack. The $5,000 probate fee is real money, but it is dwarfed by the income tax on the business shares. Probate avoidance — naming beneficiaries on registered accounts, life insurance designations — can trim the bill, but the succession planning discussion here is about the $350K capital gain, not the $5,000 probate fee. For more on the provincial picture, see our cross-Canada probate comparison.

The Business Shares at Death: $350K Gain Hits the Terminal Return

Under section 70(5) of the Income Tax Act, the deceased is deemed to have disposed of all capital property at fair market value immediately before death. For the $500K business shares with a $150K adjusted cost base, that is a $350,000 capital gain — all of it realized on the terminal T1 return in a single year.

With no surviving spouse to receive a section 70(6) rollover, the full gain is locked in. The 2026 capital gains inclusion math applies in two tiers:

• First $250,000 of capital gains at 50% inclusion: $125,000 of taxable income
• Remaining $100,000 at 66.67% inclusion (two-thirds): $66,670 of taxable income
• Total taxable capital gain from the business shares: $191,670

Add the non-registered portfolio gain ($30,000 at 50% inclusion = $15,000 taxable) and any CPP/OAS income for the partial year of death (approximately $10,000 to $15,000), and the terminal return lands north of $215,000 in total taxable income. At combined federal-plus-New Brunswick marginal rates in the top brackets, the total income tax on the terminal return is approximately $85,000 to $95,000.

The LCGE Question: Can the Lifetime Capital Gains Exemption Help?

If these shares qualify as shares of a qualified small business corporation (QSBC) under section 110.6 of the Income Tax Act, the lifetime capital gains exemption can shelter a substantial portion of the $350K gain. The QSBC test requires three conditions at the time of disposition (including deemed disposition at death):

• 90% active business test: at the moment of death, at least 90% of the corporation's assets (by FMV) must be used in an active business carried on in Canada
• 24-month ownership test: the shares must have been owned by the taxpayer or a related person throughout the 24 months before the deemed disposition
• 50% active business test: during those 24 months, more than 50% of the corporation's assets must have been used principally in an active business

If all three tests are met, the LCGE could shelter a significant amount of the $350K gain from tax. The executor claims this on the terminal return using Form T657. The key planning risk: if the corporation has accumulated excess passive investments, rental properties, or cash reserves beyond what the active business needs, it may fail the 90% test at the moment of death. A pre-mortem corporate purification — distributing excess passive assets out of the corporation or into a separate holdco — is often the difference between a $0 tax bill on the shares and a $90,000 one.

Option A: Sell the Business Now While Alive

Selling the shares during the owner's lifetime — whether to the children, a third-party buyer, or back to the corporation through a share redemption — gives control over the tax outcome in ways that death does not:

Spread the gain across multiple tax years

A $350K capital gain realized in a single year pushes $100K above the $250K threshold into the 66.67% inclusion tier. Splitting the sale across two calendar years — $175K per year — keeps both years entirely within the 50% inclusion rate. That alone converts $66,670 of taxable income (the two-thirds portion) into $87,500 at 50% inclusion, saving roughly $7,000 to $10,000 in federal-provincial tax depending on the brackets involved.

Control which bracket the gain falls into

A 72-year-old with CPP/OAS income of approximately $20,000 to $25,000 per year has room in the lower combined brackets. Selling $100K of shares per year over three or four years keeps the taxable capital gain in the range of $50,000 per year — stacking on a low base income rather than on top of a $290K RRSP collapse or other terminal-return income. The combined marginal rate on the gain drops from the top brackets (approximately 50% or higher combined) to the mid-brackets (approximately 30% to 40% combined). On $350K of total gains, that bracket management can save $15,000 to $25,000 compared to the single-year deemed disposition at death.

Claim the LCGE while you can verify qualification

If the shares qualify as QSBC shares, selling while alive lets the owner verify the 90% active-business test, the 24-month ownership test, and the 50% holding-period test with certainty. At death, the executor inherits whatever corporate balance sheet exists at the moment of the deemed disposition — including any last-minute passive-asset accumulation that could disqualify the shares. Selling while alive and claiming the LCGE on Form T657 in a year when qualification is confirmed is a cleaner, lower-risk path.

The trade-off

Selling early means giving up future dividends, any further share appreciation, and operational control. For a 72-year-old who is still actively running the business and drawing salary or dividends, the loss of ongoing income is real. The decision depends on whether the business is a going concern that the owner wants to operate, or a legacy asset being held primarily for the children.

Option B: Let the Deemed Disposition Happen at Death

Doing nothing and letting section 70(5) handle the disposition at death is the default path. The full $350K gain hits the terminal return in a single tax year, stacked on top of CPP/OAS, any RRSP/RRIF collapse, and non-registered portfolio gains. The two-thirds inclusion rate applies to the $100K above the $250K threshold.

When does this path make sense?

• The LCGE is expected to shelter most or all of the gain: if the shares clearly qualify as QSBC shares and the cumulative LCGE room is sufficient, the deemed disposition at death produces a capital gain that is immediately offset by the exemption. Tax on the shares: near zero. The risk: QSBC qualification is not guaranteed at the future moment of death.
• The owner needs the business income: selling the shares eliminates salary, dividends, and management fees. A 72-year-old who depends on the business for cash flow cannot easily replace that income.
• There is a surviving spouse: section 70(6) would allow a tax-deferred rollover to the spouse, deferring the entire gain. This senior has no spouse, so this option is not available — but for married business owners, it changes the math entirely.

Option C: Estate Freeze — Lock Today's Gain, Shift Future Growth

An estate freeze converts the owner's common shares into fixed-value preferred shares (frozen at today's $500K FMV) and issues new common shares to the next generation at a nominal ACB. All future growth in the business accrues to the new common shares, not the frozen preferred shares.

For this estate, the freeze locks the owner's capital gain at $350,000 on the preferred shares. Any growth above $500K in business value accrues to the children's common shares at their near-zero ACB. The freeze makes strategic sense when:

• Significant future growth is expected — a business that is going to double or triple in value benefits enormously from freezing the parent's exposure at today's level
• The next generation is involved in the business and will eventually take over operations
• The owner wants to begin transferring economic value without giving up voting control (the preferred shares can carry voting rights)

The moderate-growth problem: if this business is expected to grow at 3% to 5% per year — essentially tracking inflation plus a modest real return — the freeze saves relatively little. On a $500K business growing at 4% annually, the value added over 10 years is approximately $240,000. The children would eventually owe capital gains tax on that $240,000 at their own marginal rates. The administrative cost of the freeze (legal fees for the share exchange, ongoing corporate filings, valuation at freeze date) typically runs $5,000 to $15,000. If the expected growth is $240K over a decade and the children's eventual tax on that growth is $40,000 to $60,000, the freeze's net benefit after setup costs is modest. The freeze pays for itself clearly when expected growth exceeds 8% to 10% annually or when the business value is expected to increase by $500K or more.

Worked Comparison: Selling Now vs Deemed Disposition at Death

Assuming the LCGE is not available (either the shares do not qualify or the exemption room has been used), here is the approximate tax difference between the two primary options:

The spread between a single-year deemed disposition and a three-year planned sale is approximately $20,000 to $30,000 in tax savings. That gap comes from two sources: (1) keeping all gains within the 50% inclusion tier by staying under $250K per year, and (2) filling the lower combined brackets each year instead of jumping straight to the top marginal rate. The three-year sale also avoids the 66.67% inclusion rate entirely.

The Non-Registered Portfolio and the Home: Minor Players

The $100K non-registered investment portfolio carries a $30,000 embedded gain. At death, this gain is included at 50% ($15,000 taxable), adding approximately $5,000 to $7,000 in tax on the terminal return depending on the marginal rate. It is a secondary concern — worth noting on the terminal return but not worth structuring around.

The $400K Moncton home is fully sheltered by the principal residence exemption. With only one property that qualifies as a residence, the PRE designation is automatic on Form T2091(IND). The $220,000 gain on the home ($400K FMV minus $180K ACB) disappears entirely — no tax, no inclusion, no planning required. For a deeper look at how the PRE works at death, see our inheritance planning overview.

Five Steps for This NB Senior Before Any Share Transaction

1. Get a formal business valuation

The $500K FMV is an estimate. A formal valuation (CBV-prepared or CRA-acceptable) sets the ACB for any freeze, sale, or LCGE claim. Without it, CRA can reassess the deemed disposition at a different value — and the taxpayer carries the burden of proof. Budget $3,000 to $8,000 for a formal valuation of a private corporation of this size.

2. Verify QSBC qualification now

Have a tax accountant run the three-part QSBC test (90% active business, 24-month ownership, 50% holding period) today. If the corporation fails the 90% test because of excess passive investments, a corporate purification — distributing or segregating the passive assets — takes time and must happen well before death or sale.

3. Model the multi-year sale against the single-year deemed disposition

Run the actual bracket-by-bracket tax calculation for selling $175K per year over two years vs letting the full $350K land on the terminal return. Include CPP/OAS income, any RRSP/RRIF withdrawals, and the non-registered portfolio gain. The difference is real — $15,000 to $25,000 in most NB scenarios.

4. Consider life insurance for terminal-return liquidity

If the shares remain in the estate at death, the terminal return will demand $85,000 to $95,000 in tax — cash that must come from somewhere. If the home and the business are illiquid, the executor may need to sell assets under pressure. A term or permanent life insurance policy with the estate or children as beneficiary provides tax-free cash to cover the bill without forcing a fire sale.

5. Name beneficiaries on any registered accounts

If this senior holds any RRSPs, TFSAs, or other registered plans, naming the children as direct beneficiaries removes those assets from the NB probate calculation. On $100K of registered assets, that saves $500 in probate — modest, but free. It also speeds up the transfer and avoids the executor's probate timeline.

The Bottom Line: $350K of Embedded Gains Is the Entire Planning Problem

This $1M New Brunswick estate pays roughly $5,000 in probate and $85,000 to $95,000 in capital gains tax on the business shares — call it $90,000 to $100,000 total before legal and accounting fees. The home is sheltered. The non-registered portfolio is a rounding error. The business shares carry 90% of the tax cost.

The planning hierarchy is clear: (1) verify LCGE qualification — if the shares are QSBC-eligible and the exemption room is available, the tax bill drops dramatically; (2) if the LCGE does not apply, sell the shares over two or three years to stay under the $250K inclusion threshold and fill the lower brackets; (3) consider an estate freeze only if the business has meaningful growth ahead and the next generation is taking over; (4) use life insurance to provide liquidity for whatever terminal-return tax bill remains.

An estate freeze on a moderately growing business is not the wrong answer — it is just not the high-leverage answer. The high-leverage answer is making sure the LCGE applies, and if it does not, controlling when and how the $350K gain gets taxed. For this NB senior, the difference between planning and doing nothing is $20,000 to $30,000 in tax — or potentially the entire tax bill if the LCGE works.

If you are a New Brunswick business owner weighing succession timing, our business sale planning team models the LCGE qualification, the multi-year sale, and the estate freeze side by side as a single integrated plan. Book a free 15-minute consultation to walk through your specific numbers before committing to any share transaction.