I Have Just Inherited Property. What Should I Do?

Do Your Homework

Inheriting property can be an exciting time in your life. There can also be mixed emotions depending on the circumstances. The number of older Canadians is growing. This has caused the most significant number of inheritances Canada has ever seen. This trend will only increase.

If you are the estate’s executor, you will have several responsibilities. The executor must pay the income taxes before distributing the estate to any beneficiaries. When the inheritance is because of a death, the government considers that the person gave the property away just before they died. The market value of inherited properties is deemed to be tax-free. When parents leave their house to their children as a principal residence, they will not have to pay estate taxes.

The exception is if the parents leave a cottage, then the capital gains taxes must be paid. It is always wise to speak to your lawyer. Before you make any decisions, please do your research, first by reading this article.

Taxes

The great news is that there are no inheritance taxes in Ontario. This means that there are no taxes that a person who inherits from an estate must pay. However, there are some situations where taxes or charges such as water, hydro or municipal taxes might be owed on your property. Always check with your Real Estate Agent, REALTOR®.

What To Do with the New Property?

Now that you are the inherited property owner, not the estate’s executor, you must consider your next steps. 

• Where is the new property?
• Do we want to live there?
• Do we sell the new home?
• Do we sell our current residence and move into the new property?
• Do we rent our home or the new one?
• Are there tax consequences if we sell or stay?

Before You Make a Decision, You Should Consider:

• If you sell your primary residence, there are no taxes
• If you sell the inherited property, you are liable for 50% tax of the capital gain
• Capital gains are calculated by subtracting the fair market value at the time of purchase from the sale price

Make a Plan

• Reach out to family members to find as many documents as possible about the inherited property, bills of sale, tax records, utility bills, renovation, leans, and any mortgages
• Work with your REALTOR® to get CMA comparative market analysis of the property and or cottage
• Pay any capital gains if selling the inherited home or if it is a cottage/secondary residence
• When selling a primary residence that was gifted to you, you will be responsible for paying 50% of the capital gains tax
• Check with your accountant to help you understand your lifetime capital gains exemption
• Check with your REALTOR® if your considering renting the new property
• Keep very accurate records of all your properties and have an updated will 

Exciting Options

Inheriting a property from family members can be a very emotional time. It is essential to keep family memories and emotions separate from making the best decision for you and your family. Your Real Estate Agent, REALTOR® can help by offering their objective, professional opinion in these turbulent times.