The loss of a loved one can be a very difficult period. In addition to grieving, you have to make a number of decisions that may have a significant impact on both your loved one’s succession and your own estate. This is especially true if the deceased owned a house, cottage, or income property.
Just because someone names you in their will does not automatically make you their heir. You are simply considered a successor, which means that you may receive part or all of the succession. Therefore, you may choose to accept or refuse it, even if you are the sole heir or a legal heir of someone who died without a will.
No matter the case, you have six months to make your decision, starting on the day the estate is opened, which is often the date of death. However, the law provides for an additional 60 days from the closure of the inventory, even if the six-month period will soon expire.
Whether you accept or reject the succession, legal advisors usually recommend waiting for the notice of closure of inventory, which signifies that the inventory is complete, to be published in the register of personal and movable real rights. Once completed, the inventory will list all of the deceased’s assets and debts, so you’ll be prepared to make the best possible decision.
In general, successors tend to refuse an estate if the value of the debts exceeds the value of the assets. If you want to renounce an estate, you have to go to a notary, as this is usually done by notarial act.
Accepting a succession is simpler. You can do this expressly or tacitly by taking or not taking certain actions. For example, if you use the deceased’s property as your own (e.g., their house), you may be considered a full heir. But paying the funeral expenses (link in French) or distributing the deceased person’s clothing or household items does not automatically make you an heir.
By accepting an estate, you agree to pay the estate’s debts in proportion to what you inherit. For example, if you inherit (link in French) $20,000, but the estate owes $50,000, you will only have to pay back a maximum of $20,000.
That said, in some cases, the heir may be required to pay debts exceeding the value of property they received—for example, if they didn’t make an inventory or failed to respect (link in French) the rules set out in the law.
Not to be confused with successors and heirs, the liquidator is the person who administers and divides the property of the succession among the heirs. Formerly known as an executor, the liquidator’s duties include verifying whether the deceased had a will, preparing the inventory, settling the debts of the succession, and paying taxes.
Before distributing the assets, the liquidator must draw from them to pay the deceased’s various creditors, which may include financial institutions and the government.
People often leave behind a house or condominium when they die. A building would obviously be part of the succession and included in the inventory along with any associated mortgage.
However, if the deceased had mortgage life insurance, the mortgage will be repaid according to the terms of the insurance contract. Furthermore, if you had a joint mortgage with the deceased, you’ll have to continue making payments on your own, unless other arrangements are made with your financial institution.
Before you can officially take possession of bequeathed property, you’ll need to sign a declaration of transmission of real estate, a legal document prepared by a notary and published in the land register that makes your new property title public and official (link in French).
Unlike other countries, Canada does not impose a special tax if a loved one dies. Instead, the government considers all of the deceased’s assets as having been sold at fair market value just before their death. If any assets have appreciated in value, the succession (not the heirs) will be responsible for capital gains tax.
If you inherit from your spouse, you’re entitled to use the spousal rollover. In other words, the capital gains tax on inherited property will be collected only when you dispose of the property yourself by selling or donating it, or upon your own death. For example, if you inherit a cottage or income property, there will be no fiscal consequences as long as you own it.
Unfortunately, the deceased’s children do not benefit from this tax advantage. If you inherit a cottage from one of your parents, the succession will have to pay capital gains tax on the property.
As with regular transactions, the government does not collect any capital gains tax on the bequest of a principal residence. This means that if you inherit your spouse’s share of your property, you and the succession will be exempt from taxation, even when you eventually dispose of the property.
Dealing with a succession is complex. Whether you’re a liquidator, successor, or heir, don’t hesitate to consult a legal advisor who can answer your questions and help you through this process.