If you are the beneficiary of an estate in Alberta, you may be wondering how (or if) your inheritance will be taxed in the province. This is an important question, as taxes can have a significant impact on your finances. Unlike the United States, inheritance tax does not exist in Alberta or Canada. However, taxes can still affect the estate of the person who has passed before its contents reach the beneficiary. Our blog explains tax considerations beneficiaries should be aware of when a loved one passes.
At Verhaeghe Law, our Edmonton wills and estates lawyers have decades of combined experience helping clients navigate estate planning, administration, and litigation in the province. If you are the executor or beneficiary of an estate and you’re wondering what effect taxes will have on you, schedule a consultation with our legal team today. You can call our Edmonton office at (587) 410-2500 or reach out online. We serve clients across Alberta.
Do You Pay Tax on Inheritances in Alberta?
Beneficiaries do not pay tax on what they inherit. This is true in Alberta and the rest of Canada. However, the deceased person’s estate must fulfill certain tax obligations before inheritance passes to beneficiaries. These include:
- A final tax return (also called a terminal return) that includes all income from January 1st of that year until the date of passing.
- This tax return will encompass all regular income, along with all deemed dispositions via capital gains (e.g., RRSPs, RIFs, real estate, investments, private shares).
The executor of the estate (who may or may not also be a beneficiary) must file this tax return on behalf of the estate. After doing so, they will receive a CRA clearance certificate that allows them to distribute remaining assets to beneficiaries. If the executor does not file the terminal return and obtain a clearance certificate, they may be held personally liable for any taxes that go unpaid.
So, although beneficiaries do not pay a direct tax on the inheritance they receive, the terminal return filed for the estate may significantly reduce what’s left for distribution. This may affect what beneficiaries ultimately receive. If you are confused about how to file a terminal tax return or about the effect that it will have on your inheritance, you should consult with an experienced estate planning or estate administration lawyer.
Probate Fees in Alberta
Probate fees are not the same as taxes. However, in order to validate a will and proceed with probate, an estate must pay a probate fee to the provincial government.Â
Probate fees in Alberta are among the lowest in Canada. The total amount of probate fees that may be paid is capped at only $525. The fee you must pay is determined by the net value of the estate at the time the deceased passes. Generally, probate fees will not significantly affect the amount of inheritance you receive.
| Net value of property in the estate | Fee |
| $10,000 or less | $35 |
| $10,000 – $25,000 | $135 |
| $25,000 – $125,000 | $275 |
| $125,000 – $250,000 | $400 |
| Over $250,000 | $525 |
It should be noted that some assets may not require probate, such as jointly held property, RRSPs, TFSAs, life insurance policies with named beneficiaries, and more. For this reason, it is recommended that beneficiaries be named on all registered accounts to prevent their value from being included in probate.
Need Help With Estate Administration or Inheritance in Alberta? Call Verhaeghe Law Today
Inheritance is not taxed in Alberta directly. However, income tax, capital gains tax, and probate fees may affect the final value of the estate. A large terminal tax return may result in a lower inheritance for a beneficiary indirectly. Executors have a responsibility to administer the estate accordingly, so beneficiaries must understand what they can expect to receive.
If you’re managing or expecting an inheritance and want clarity on legal or tax implications, contact Verhaeghe Law for trusted estate planning and probate guidance. You can schedule a consultation by calling our Edmonton office at (587) 410-2500 or by filling out our online contact form. We can help you no matter where you’re located in Alberta.