Wills and estate planning in Ontario: the tax side nobody explains

If you die without a will in Ontario, the Succession Law Reform Act sets the split. A married spouse with no children inherits everything. With children, the spouse takes a preferential share of CAD 350,000 first. The rest is divided: half each with one child, or one third to the spouse and two thirds among two or more children.

Common-law partners are not included. They can make a claim for support, through the courts, at the worst possible time. A child under 18 does not receive their share directly either: it is held under court supervision until they are adults.

And nobody you chose is in charge. A relative has to apply to the court to administer the estate.

• A will. Who gets what, who is the executor, and who would raise your children.
• A continuing power of attorney for property. Who manages your money if you are alive but cannot. Without it, your family may need a court order to pay your bills.
• A power of attorney for personal care. Who makes health and care decisions for you.

All three should be drafted by an estates lawyer who knows your family. The fee is small against what it protects.

Three kinds of asset pass directly, whatever the will says:

• RRSPs, RRIFs, TFSAs and pensions with a named beneficiary
• Life insurance with a named beneficiary
• Property held jointly with a right of survivorship

This is efficient, and it is where plans break. A beneficiary form signed twenty years ago still stands. A former spouse may still be named. An account held jointly with one child "for convenience" goes to that child alone.

Make equal mean equal

A parent leaves a CAD 500,000 RRSP to a daughter by beneficiary designation and a CAD 500,000 house to a son through the will. It looks even. But the RRSP is taxed on the parent's final return, and that bill, roughly CAD 242,581 at 2026 Ontario rates if added to CAD 50,000 of other income, is paid by the estate. The estate is the house. The daughter keeps CAD 500,000 and the son's share shrinks by the tax.

The fix is a sentence in the will or a different mix of assets. Somebody has to run the numbers first.

Use the rollover deliberately

Leaving everything to a spouse defers all the tax. Sometimes it is better to trigger some of it on the first death, for example where the deceased has unused losses or a low-income final year.

Give with the right asset

If you plan to leave money to charity, the donation credit can offset tax on the final return. If you plan to leave a TFSA, it passes without tax. Matching the asset to the person is most of estate tax planning.

If you own a company

Your lawyer may suggest two wills, so that private company shares stay out of probate. A shareholders' agreement should say what happens to your shares. And an estate freeze can fix today's value in your hands so that future growth belongs to the next generation.

Being an executor is a job, often a year or two long. Choose someone organised, willing and likely to outlive you, and tell them. Leave a list of assets, accounts, advisers and where the documents are. The executor will need to file tax returns and get a clearance certificate before distributing, so introduce them to your accountant now.

After a marriage, separation, birth, death in the family, a move to another province or country, selling or starting a business, a large inheritance, and in any case every five years.