Estate Planning in Canada: Probate Fees and Deemed Disposition on Death

Canada has no estate tax or inheritance tax. That is the good news. The not-so-good news is that the tax system achieves a similar result through deemed disposition at death — a mechanism that can trigger substantial capital gains tax and RRSP/RRIF inclusion on a deceased person’s final tax return. Combined with provincial probate fees, the total cost of transferring wealth on death can be significant.

New tool: Use our Deemed Disposition Calculator to model your estate’s final-return tax bill across non-registered assets, principal residence exemption, RRSP/RRIF inclusion, and provincial probate — with and without the spousal rollover.

Understanding these rules is essential for anyone with assets beyond a primary residence and a basic bank account.

Deemed Disposition: The “Exit Tax” on Death

Under section 70(5) of the Income Tax Act, a deceased person is deemed to have disposed of all capital property at fair market value (FMV) immediately before death. This means every investment, rental property, cottage, and business asset is treated as if it were sold — and any resulting capital gain is taxable on the deceased’s final tax return.

The deceased did not actually sell anything. But the CRA treats death as a realization event, ensuring that accrued gains that were never taxed during the person’s lifetime are captured.

This applies to stocks, ETFs, mutual funds, rental properties, cottages, and business assets. The principal residence exemption still applies on death. The Lifetime Capital Gains Exemption ($1,250,000 in 2026 for qualified small business corporation shares) can also shelter gains.

Additionally, the full value of any RRSP or RRIF is included as ordinary income on the final return — not as a capital gain, but taxed at the deceased’s marginal rate. A $500,000 RRIF adds $500,000 to income, resulting in roughly $260,000 in tax at Ontario’s top combined rate of ~53%.

The Spousal Rollover Exception

The single most important estate planning provision in Canadian tax law is the spousal rollover under section 70(6). When capital property is transferred to a surviving spouse or common-law partner (or to a qualifying spousal trust), the transfer occurs at the deceased’s adjusted cost base — not at fair market value.

This means no capital gain is triggered. The tax is deferred until the surviving spouse eventually disposes of the property or dies.

Similarly, an RRSP or RRIF can be rolled over to the surviving spouse’s RRSP or RRIF with no immediate tax consequences, provided the spouse is named as the beneficiary or successor annuitant.

The spousal rollover is automatic — it applies by default when property passes to a spouse. The executor can elect out of the rollover (to use up losses on the final return, for example), but in most cases the deferral is beneficial.

Probate Fees by Province

Probate fees are based on the gross value of assets passing through the will — not net of debts.

Province	Fee on $1M Estate	Fee on $2M Estate
Alberta	$525 (flat cap)	$525
British Columbia	$13,450	$27,450
Manitoba	$6,930	$13,930
New Brunswick	$5,000	$10,000
Newfoundland	$5,994	$11,994
Nova Scotia	$14,411	$31,291
Ontario	$14,500	$29,500
PEI	$4,000	$8,000
Quebec	$0 - $65	$0 - $65
Saskatchewan	$7,000	$14,000

Quebec stands out: a notarial will (signed before a notary) avoids probate entirely. Alberta caps fees at $525 regardless of estate size. Ontario and BC have the highest fees, making probate avoidance strategies particularly worthwhile.

Worked Example: A $2 Million Estate

The situation: Margaret, age 78, is a widow living in Ontario. She passes away with the following assets:

Asset	Fair Market Value	Adjusted Cost Base	Gain
Principal residence	$800,000	$250,000	$550,000 (exempt)
RRSP	$500,000	n/a	n/a (full inclusion)
Non-registered investment portfolio	$400,000	$200,000	$200,000
Bank accounts and GICs	$200,000	n/a	n/a
Car and personal effects	$100,000	n/a	n/a
Total	$2,000,000

Tax on the Final Return

1. Principal residence: The $550,000 gain is fully exempt under the principal residence exemption. Tax: $0.

2. RRSP: The full $500,000 is included as income on the final return.

3. Non-registered investments: Capital gain of $200,000. At the 50% inclusion rate, taxable capital gain = $100,000.

Total taxable income on final return: $500,000 (RRSP) + $100,000 (taxable capital gain) = $600,000.

Approximate tax (Ontario, 2026):

Component	Amount
Federal tax on $600,000	~$155,000
Ontario tax on $600,000	~$72,000
Total income tax	~$227,000

4. Ontario probate fees: $15 per $1,000 on assets over $50,000 passing through the will.

Assuming all $2,000,000 passes through probate: $250 + ($1,950,000 / $1,000 x $15) = $29,500.

Total cost: $227,000 + $29,500 = $256,500 (12.8% of the estate).

What If Margaret Had a Surviving Spouse?

If Margaret’s husband Tom were still alive and named as beneficiary:

• RRSP: Rolls to Tom’s RRSP. Tax: $0 (deferred).
• Investments: Transfer at ACB via spousal rollover. Tax: $0 (deferred).
• Principal residence: Exempt regardless.
• Probate: May still apply, but assets held jointly with right of survivorship bypass probate.

Total immediate tax: Potentially $0. The tax is deferred until Tom’s death or until he sells the assets.

This comparison — $256,500 vs. $0 — illustrates why the spousal rollover is the cornerstone of Canadian estate planning.

Strategies to Reduce the Tax Burden

Gradual RRSP/RRIF drawdown: Rather than letting a large balance be fully included at the highest marginal rate on the final return, withdraw above the RRIF minimum each year to “fill up” lower brackets. Withdrawing an extra $20,000 per year for 15 years at a ~30% average rate costs $90,000 — compared to $300,000 included on the final return at ~50%, costing $150,000.

Spousal or alter ego trust: A joint partner trust (both spouses age 65+) or alter ego trust (single person age 65+) holds assets during your lifetime and transfers them on death without probate. Assets are still subject to deemed disposition, but you avoid probate fees — significant in Ontario and BC.

Beneficiary designations: RRSPs, RRIFs, TFSAs, and life insurance with named beneficiaries pass outside the will and skip probate. Keeping designations current is one of the simplest estate planning steps.

Joint ownership with right of survivorship: Jointly held assets pass automatically to the surviving owner, bypassing probate. However, adding a child as joint owner can trigger an immediate deemed disposition — consult a tax professional first.

Life insurance: A policy with a named beneficiary pays out tax-free, bypasses probate, and provides liquidity to cover the tax bill on the final return — preventing forced asset sales.

Key Takeaways

• Canada has no estate tax, but deemed disposition at death taxes all accrued capital gains and includes the full RRSP/RRIF balance on the final return.
• The spousal rollover defers all of this tax until the second spouse’s death — it is the single most impactful estate planning provision.
• Probate fees vary dramatically by province: from $0 (Quebec notarial wills) and $525 (Alberta cap) to $29,500+ on a $2M estate in Ontario.
• Gradual RRSP drawdown during retirement can save tens of thousands compared to a large lump-sum inclusion at death.
• Beneficiary designations on registered accounts and insurance bypass probate — keep them current.
• Use the Income Tax Calculator to model the tax impact of different drawdown strategies, and the RRSP Withdrawal Tax Calculator to see how various withdrawal amounts are taxed.