Testamentary freedom is a deeply entrenched principle in Canada, but it is not absolute. Individuals who use wills and other instruments to distribute their assets remain legally obligated to make adequate provision for their dependants. When an individual fails to satisfy this obligation, the distribution of their estate can be modified by the courts to provide for their dependants or family. Otherwise, no one is entitled to inherit from a will.

Alternative means of distributing wealth that avoid probate and the payment of probate fees continue to grow in popularity in Canada, although wills remain a key estate-planning tool for distributing property upon death. Viable alternatives to wills include:

• the use of beneficiary designations to transfer assets;
• trusts; and
• inter vivos transfers, including transfers that place assets in joint ownership and provide the donee with a right of survivorship.

While there is old wealth in Canada, often tied to early industrialisation and banking, new cohorts of wealth have developed in recent decades in association with natural resource development, real estate investing, entrepreneurship, the advent of financial services, and generational wealth tied to agriculture, particularly farmland.

Because Canadian wealth tends to be asset-based, estate planning strategies often focus on how to limit the number of assets that proceed through probate and are subject to estate administration tax, particularly for inter-generational wealth transfers. Minimising capital gains tax that an estate must pay is also a pressing consideration.

For an individual to be domiciled in Canada, the common law requires that they either:

• were born to parents domiciled in Canada (in which case, their domicile of origin is Canada) and did not acquire, or later abandoned, a domicile of choice; or
• acquired a provincial domicile of choice by unequivocally intending to reside there permanently, rather than for a specific or temporary purpose.

Courts may consider various factors in determining where one is domiciled, including where family is located and where real property is owned or rented.

For estate and succession purposes, domicile in Canada is provincial or territorial, rather than national.

Domicile is most relevant to the right to make a will in relation to immovables. For example, domicile governs whether the testator has capacity to make a will regarding movables, whereas the capacity to make a will governing immovables is governed by the lexus situs of the immovables. Accordingly, a worldwide estate cannot be governed uniformly by the law of a single domicile.

If an individual is domiciled in Canada at the time of death, their estate will be administered under the law of the province in which they were domiciled. The province is also the appropriate place to apply for probate of that person’s estate, unless the deceased held real property in another jurisdiction. Canada does not impose an estate or inheritance tax; however, an administrative tax on probate is typically charged in the province, or provinces, where probate is obtained. This tax may only be charged on immovables located in the jurisdiction if the estate is not domiciled there. In comparison, if the estate is domiciled in the jurisdiction where probate is obtained, probate tax may be charged on immovables located in the jurisdiction and movables located both inside and outside of the jurisdiction.

Domicile is relevant to inheritance claims, as it determines which law governs succession over movable property. For immovables, succession is governed by the law of the place where the immovable is situated.

Domicile is also salient to whether a marriage revokes a prior will. The question of whether a will of movables has been revoked by marriage is governed by the law of the testator’s domicile at the time of the marriage: see Davies v Collins, 2011 NSCA 79.

In Canada, jurisdiction over divorce is governed by the Divorce Act, RSC 1985, c 3 (2nd Supp) rather than domicile. A court in a province will have jurisdiction to hear and determine a divorce proceeding if either spouse has been habitually resident in the province for at least one year immediately preceding the commencement of the proceeding. Similarly, jurisdiction over matrimonial property claims is governed by provincial legislation, rather than domicile. However, if a matrimonial property dispute involves a conflict of laws, a husband and wife’s rights to each other’s movables will be governed by the law of the matrimonial domicile, unless there is no marriage contract. If the couple changed domicile after the marriage, the law of the new domicile will govern their movables.

In Canada, income tax liability is determined based on residence under the Income Tax Act, RSC 1985, c 1 (5th supp). Each year, a resident of Canada is subject to taxation on their worldwide income, whereas a non-resident is taxed only on income from Canadian sources, including income earned from employment in Canada, income from a business carried on in Canada, and capital gains from the disposition of property in Canada. Under Section 250 of the Act, a person is deemed to have been resident in Canada during a taxation year if they sojourned in Canada for periods totalling 183 days or more. 

Because the term residence is not defined in the Income Tax Act, its meaning has developed through case law. Residence is a question of fact. The courts have held that an individual is ordinarily resident in Canada, for tax purposes, if Canada is the place where the individual normally or customarily lives, having regard to social relations (such as a spouse, common-law partner, or dependants in Canada), interests, and conveniences. Determining residence requires consideration of all relevant circumstances, including residential ties with Canada compared to other countries, the length of time spent in Canada and abroad, and the purpose, intention and continuity of those stays. Pertinent residential ties may include the presence of a dwelling or personal property in Canada, or social or economic ties to the country.

Domicile is not an independent basis for income tax residency under Canadian domestic law. Residence and domicile are distinct concepts. Residence is a question of fact, requiring only bodily presence as an inhabitant of a place, whereas domicile depends on the intention to make that place a fixed and permanent home: see Olson v Ontario (1992), 12 CRR (2d) 120 (Ont Ct J (Gen Div)). An individual may have more than one residence, but only one domicile.

In Canada, the distribution of an estate in the absence of a will is governed by provincial or territorial legislation, and varies across jurisdictions.

In most jurisdictions, the surviving spouse is entitled to a preferential share of the intestate estate. The value of this share varies widely, ranging from CAD350,000 in Ontario to CAD50,000 in Nova Scotia and Nunavut. In Ontario, Nova Scotia, Prince Edward Island, Yukon, Nunavut, and the Northwest Territories, the preferential share is only payable to a spouse by marriage. In British Columbia, Manitoba, Alberta, and Saskatchewan, it may be paid to either surviving common-law spouses or spouses by marriage. The preferential share is only payable from assets forming part of the deceased’s estate, and should not be paid from assets that pass outside of probate.

In addition to the preferential share, a surviving spouse is typically entitled to a distributive share of the remaining estate. In Ontario, if the deceased left one child, the spouse receives one half of the remaining estate, and the child receives the other half. If there is more than one child, the spouse receives one-third and the children share the remaining two-thirds. If the deceased left no children, the surviving spouse inherits the entire estate to the exclusion of the deceased’s next of kin. Only where the deceased dies without a surviving spouse or children will the estate pass to the deceased’s next of kin.

Comparable rules apply elsewhere in Canada. In Manitoba and British Columbia, however, the surviving spouse’s entitlement varies depending on whether the deceased left children, and if so, whether those children were also children of the surviving spouse.

Several jurisdictions limit a separated spouse’s entitlement on intestacy. In Ontario, Alberta, Manitoba, and the Northwest Territories, a surviving spouse may be excluded from sharing in the estate if the spouses had separated prior to the deceased’s death and any statutory requirements are met. These requirements may include living separate and apart for a requisite amount of time, or entering into a separation agreement or obtaining a court order.

If a person dies intestate without surviving relatives, the estate will escheat to the Crown. Personals property escheats to the Crown in the jurisdiction where the person was domiciled at death, regardless of where the personal property is located. Immovables escheat to the Crown in the jurisdiction where the property is situated, regardless of the deceased’s domicile.

Canada has no forced heirship regime. In many provinces, however, a surviving spouse may elect to receive an equalisation of family property rather than inherit under the deceased spouse’s will.

In Ontario, Section 5(2) of the Family Law Act, RSO 1990, c F.3 allows a married spouse to elect an equalisation payment within six months of death. Unless the will provides otherwise, this election revokes any testamentary gifts to the surviving spouse. The right to elect equalisation may be waived by failing to file an election within the prescribed period, resulting in a deemed election to take under the will or on intestacy, although the court may extend the deadline. Similar legislative provisions exist in the Northwest Territories and Nunavut.

Comparable relief is available in Manitoba, Saskatchewan, Alberta, Nova Scotia, New Brunswick, and Newfoundland and Labrador. Manitoba and Saskatchewan allow both married and common-law spouses to apply for equalisation. Alberta extends the right to married spouses and adult interdependent partners, provided the claim could have been brought before the deceased spouse passed. Nova Scotia allows claims by married spouses and those in registered domestic partnerships to apply for equalisation. In New Brunswick and Newfoundland and Labrador, only married spouses may seek equalisation.

British Columbia does not provide for equalisation payments. Instead, spouses may apply to vary a will under the Wills, Estates and Succession Act, SBC 2009, c 13. This is generally viewed as a limitation on testamentary freedom, rather than forced heirship, as eligibility to apply does not guarantee entitlement.

In Prince Edward Island, a married spouse may continue an equalisation claim only if it was commenced before death.

A spouse may also waive the right to an equalisation payment by entering a domestic contract or spousal agreement before the death of either spouse. To be effective, the agreement must clearly address the distribution of property on separation or death, or expressly waive the right to elect equalisation upon death. A clause stating only that each spouse retains ownership of their property is insufficient. The agreement must also be in writing, signed by both parties, and witnessed.

In Quebec, a surviving spouse may also renounce the right to partition the family patrimony following the death of their spouse through a formal notarial act. 

The entitlement to receive equalisation is personal to the surviving spouse; the estate of the deceased spouse cannot initiate the claim: see Rondberg Estate v Rondberg Estate, 1989 CanLII 4153 (ON CA). In some provinces, including Ontario, property that passes outside the estate may also be included in the equalisation calculation.

Equalisation claims may also be resolved by settlement between the surviving spouse and the deceased spouse’s estate. In Gibbons v Livingston, 2018 BCCA 443, the court upheld a mediated settlement between an estate trustee and a common-law spouse, finding that the outcome aligned with family property rights. Settlement may be attractive where the surviving spouse’s entitlement to equalisation would otherwise be difficult to establish.

In all Canadian jurisdictions, married spouses have enforceable rights in family property, including assets accumulated during the spousal relationship, subject to certain statutory exemptions.

During the spouses’ lifetimes, separation generally entitles a married spouse to an equalisation of net family property, typically amounting to one half of the marital property. The matrimonial home is ordinarily included in the family property regime, even if it was owned by one spouse before the marriage.

While both spouses are alive, one spouse may not transfer or encumber the matrimonial home without the written consent of the other, unless a court dispenses with that requirement. Restrictions on the transfer of other forms of matrimonial property are generally less stringent. However, transfers made as gifts, for no consideration, or for inadequate consideration to defeat a property division claim may be challenged, although statutory remedies are often subject to limitation periods. In Manitoba, Saskatchewan and Alberta, for example, the courts may order the return of the property, grant judgment against the transferor, or include the property in the transferor’s share of the property on division.

Alternatively, in Ontario, a spouse who transfers property may be deemed to continue owning the property for the purposes of a matrimonial property claim, and be required to share its value through equalisation.

Property rights may change on death. In most provinces, a surviving spouse may choose either to inherit under the deceased spouse’s will or to elect an equalisation payment. This election may be advantageous where the will provides the spouse inadequate financial support.

Where the deceased spouse transferred property before their death without the surviving spouse’s consent, three principal mechanisms may permit recovery – statutory clawback provisions in family property legislation, applications by the surviving spouse for property division following death, and claims under fraudulent conveyances legislation. Fraudulent conveyance claims may be difficult to establish, however, as they require proof of intent. In Mawdsley v Meshen, 2012 BCCA 91, for example, the claim failed because the surviving spouse could not establish that the deceased intended to deprive him of a remedy.

The availability of clawback remedies varies provincially, and may also be constrained by statutory limitation periods. The surviving spouse will bear the burden of proving that the transfer dissipated matrimonial property, or was made for inadequate consideration with the intention of defeating the spouse’s claim.

Prenuptial and postnuptial agreements addressing estate and succession planning rights are generally enforceable in Canada, even where they do not comply with provincial or territorial wills legislation. Marriage contracts can survive death and be enforced by or against the estate of the deceased. Such agreements may address the division of property on death, releases of estate claims, and waivers of succession rights.

Courts tend to interpret these agreements restrictively, particularly clauses purporting to waive a spouse’s rights on intestacy. To be effective, the agreement must contain clear and explicit language relinquishing substantial succession rights, so that the parties understand the rights being relinquished.

To be enforceable, prenuptial and postnuptial agreements must also satisfy statutory requirements, typically articulated in family law legislation. Agreement must generally be in writing, signed by the parties, and witnessed. Canadian courts also retain discretion to set aside agreements that are unconscionable, entered without independent legal advice, or affected by material non-disclosure. Where an agreement is negotiated with full and honest disclosure, and without exploitative conduct, however, it will likely withstand judicial scrutiny. An agreement will not necessarily be set aside for lack of legal advice if the surviving spouse knowingly chose not to obtain it, particularly where they had sufficient familiarity with family law matters to appreciate the option: see Steernberg v Steernberg Estate, 2006 BCSC 1672.

The governing framework varies by province, with each jurisdiction prescribing legislation governing domestic contracts and their interaction with succession law. Where a dependant support claim is brought against the estate of the deceased spouse, the agreement may be considered by the court in assessing the testator’s moral obligations at the time of death, but it will not oust the court’s jurisdiction.

In Canada, an outright transfer of property during the donor’s lifetime is generally treated as a disposition that triggers the realisation of any accrued gain, meaning that income tax is payable the year of the transfer unless the gain is offset by a loss or the transfer qualifies for rollover treatment.

The tax treatment may depend on the recipient of the property. Transfers between spouses may qualify for tax-deferred rollovers, allowing assets to pass between spouses – or former spouses as part of a matrimonial property settlement – without immediate tax consequences.

Certain transfers to children may also qualify for rollover treatment. This relief applies where the transferred property consists of real property or depreciable property of a prescribed class, the child was resident in Canada immediately before the transfer, and the property was used principally in a farming or fishing business.

Property transferred to a trust may qualify for an exemption under Section 107.4 of the Income Tax Act if specified conditions are met, including that the disposition does not change the beneficial ownership of the property, the proceeds are not otherwise determined under another provision of the Act, and the trust is resident in Canada at the time of the transfer.

Where real property is transferred, provincial land transfer tax will also generally be payable. The rate and structure of this tax varies provincially.

Canada does not impose any estate or inheritance taxes. However, on death, a taxpayer is deemed to have disposed of all of their capital property – both depreciable and non-depreciable – at its fair market value for the purpose of calculating capital gains tax. This deemed disposition occurs immediately before death and may give rise to either a capital gain or loss equal to the difference between the property’s fair market value and its adjusted cost base (for non-depreciable properties). Fifty percent of any gain is included in deceased’s taxable income as a taxable capital gain, while capital losses may be applied against gains in the year of death.

Where property passes to beneficiaries, it is generally rebased at fair market value at the time of death. Any gains or losses accruing between death and distribution of the property are taxable to the estate, which is treated as a separate tax payer. For up to 36 months after death, qualifying estates may benefit from graduated tax rates, if they meet the definition of a graduated rate estate under the Income Tax Act.

Where the property passes to the deceased’s spouse or common-law partner, or to a qualifying spousal trust, capital gains tax may be deferred through roll-over provisions. In such cases, the deferred capital gains are instead realised on the death of the surviving spouse or partner.

The principal residence exemption also either eliminates or reduces the capital gain on the deceased’s principal residence. However, the exemption may be claimed on only one property in a given tax year, even if the deceased owned multiple residences.

In addition to income tax consequences, the estate be required to pay probate fees or estate administration tax on assets subject to probate.

Common lifetime succession planning mechanisms used in Canada include trusts, inter vivos gifts, and transfers of property into joint ownership with a right of survivorship.

Trusts

Trusts are widely used in estate planning to achieve objectives like deferring taxes and sheltering assets from creditors. However, if a trust is not properly constituted, it may be deemed void, in which case the intended benefits are lost and the trust property may revert back to the settlor. Both standard inter vivos trusts and specialised forms, such as alter ego trusts and joint partner trusts recognised under the Income Tax Act, may be used for succession planning.

Inter Vivos Gifts

A valid inter vivos gift requires: (i) a clear intention to make a gift, (ii) delivery or transfer of the property during the donor’s lifetime, and (iii) acceptance by the donee. Such gifts can reduce estate administration costs by avoiding probate, but they are generally irrevocable once given, unlike wills, which remain revocable until death.   

Where evidence of donative intent is absent, the law presumes that the donee holds the property in trust for the donor. This doctrine, the presumption of resulting trust, was affirmed by the Supreme Court of Canada in Pecore v Pecore, 2007 SCC 17. If a transfer is challenged and the presumption applies, the property will revert back to the donor’s estate on death.

Joint Ownership

Property may also be transferred inter vivos by adding another person to title as a joint tenant or tenant in common. Where property is held by joint tenants, the donor may transfer either a full beneficial interest in the property, or only a right of survivorship. If only a survivorship interest is intended, the donee receives legal title only while the donor retains beneficial ownership during their lifetime. In such cases, any rights exercisable by the donee are held in trust for the donor until the donor’s death, at which point the beneficial interest passes to the surviving joint tenant.

Lifetime succession planning techniques, such as trusts, inter vivos gifts, and transferring property into joint ownership are desirable because they allow property to pass outside the estate and therefore avoid probate and estate administration tax.

They may also reduce the income tax payable by the donor’s estate. Because the property has already been transferred and is no longer included in the deceased’s estate, it is not subject to the deemed disposition rule that otherwise applies on death. As a result, the property is not included when calculating any capital gain realised by the estate for income tax purposes.

Canada has no comprehensive protocol for dealing with digital assets, like email accounts, social media accounts, and cryptocurrency, after an account holder passes away.

Some jurisdictions, including Prince Edward Island, New Brunswick, Saskatchewan and the Yukon, have enacted legislation granting fiduciaries, including estate representatives, limited authority to access digital assets. Fiduciaries are permitted to access digital assets in accordance with the deceased account-holder’s will, letters of administration, power of attorney, trust instrument, or court order. The legislation also addresses the circumstances in which service agreements may restrict a fiduciary’s access and when service providers are shielded from liability for complying with the legislation. However, the legislation does not appear to extend to digital assets held directly by the account holder, such as cryptocurrency.

Elsewhere in Canada, comparable legislation has not been enacted. In Alberta, however, the Estate Administration Act, SA 2014 c E-12.5, authorises estate representatives to do anything in relation to the deceased’s property that the deceased could do if alive and of full capacity, and the legislation expressly includes online accounts within the scope of estate property.

In most Canadian jurisdictions, the custodians of digital assets – such as Apple, Google, and social media platforms – are not required to grant estate representatives access to a deceased account-holder’s accounts, even where probate has been obtained. Access is instead usually governed by the platform’s terms of the service agreement, potentially requiring fiduciaries to pursue litigation to obtain access to the account-holder’s digital assets.

Even in jurisdictions with digital assets legislation, court orders may still be necessary, given that custodians subject to the US Stored Communications Act (SCA), 18 U.S.C. §§ 2701–2713 cannot disclose the contents of an account without the account-holder’s consent, regardless of Canadian legislation granting fiduciary access. The interaction between the SCA and Canadian succession law has not yet been considered by Canadian courts.

At this time, effective estate planning for digital assets in Canada generally requires an asset-by-asset approach. Although testamentary instruments may address the disposition of digital assets, additional steps will likely be necessary to ensure that estate representatives can access them after death. Digital custodians may not recognise a grant of probate as sufficient authority to access a deceased account-holder’s account. Account holders can mitigate this risk by using “legacy tools” offered by digital service providers to authorise their estate representatives or other designated persons to access their accounts after death. Where available, a legacy contact should be designated for each digital asset in accordance with the applicable service agreement.

In Canada, legal reform in this area has been recommended by both the Uniform Law Conference of Canada (ULCC) and the Alberta Law Reform Institute (ALRI). In 2016, the ULCC adopted model legislation, the Uniform Access to Digital Assets by Fiduciaries Act, which would grant fiduciaries default authority to access digital assets belonging to a deceased or incapacitated person. Versions of this legislation have since been adopted, with modifications, in Saskatchewan, Prince Edward Island, New Brunswick and the Yukon.

In 2024, ALRI published its final report, Access to Digital Assets, recommending modifications to the ULCC model legislation. However, Alberta has not yet enacted legislation granting fiduciaries express statutory authority to access digital assets.

Family business succession planning in Canada varies depending on the business structure. The three principal forms are sole proprietorships, partnerships and corporations.

Sole Proprietorships

There is no legal distinction between the owner and the business with sole proprietorships, which generally simplifies succession planning. Through a will, the owner may leave the business to beneficiaries, direct the executor to wind up or sell the business, or grant a beneficiary an option to purchase it or a right of first refusal.

Alternatively, a buyout may be arranged before the proprietor’s death; if implemented gradually, a buyout may also have reduced tax consequences.

Insurance may also play an important role in succession planning and asset protection. Life or disability insurance can fund business liabilities, including tax liabilities, in the event of the owner’s incapacity or death, facilitating the continuation or transfer of the business. Conversely, inadequate asset protection may frustrate succession planning. If the tax liabilities arising from the deemed disposition of the business exceeds the estate’s liquid assets, the business may need to be dissolved.

Partnerships

A partnership agreement is essential for succession planning. Without one, the partnership will generally dissolve on a partner’s death, and profits and partnership property will be distributed equally, regardless of partners’ respective contributions.

A well-drafted partnership agreement may allow partners to designate successors in their wills, or require the surviving partners to buy out the deceased partner’s interest. For tax purposes, a partnership agreement should also specify whether the deceased partner’s estate will receive a continuing partnership interest or a right to receive property from the partnership.

Corporations

Because a corporation is a separate legal entity, control of the corporation following a shareholder’s death is often governed by corporate instruments, like a shareholder agreement, rather than the shareholder’s will.

A common succession planning strategy for corporations is an estate freeze, which fixes the value of the current owner’s interest in corporate shares at the date of the freeze. The owner typically exchanges existing shares for fixed-value preferred shares, and new common shares are issued to successors so that future growth accrues to them. Estate freezes facilitate intergenerational planning and may reduce probate fees. Valuation discounts may also arise when transferring minority interests to family members.

Life insurance is also frequently used in closely held corporations to fund buy-sell obligations under shareholder agreements or to protect business loans. Where a private corporation owns and is the beneficiary of a life insurance policy, the policy proceeds – net of the adjusted cost basis – may also be credited to the corporation’s capital dividend account, allowing the corporation to distribute a substantial portion of proceeds to shareholders as tax-free capital dividends.

Canadian law is divided on whether corporate assets may be disposed of through a shareholder’s will. Courts in Ontario, Alberta, and Manitoba have permitted such gifts, particularly where the testator was the sole shareholder of the corporation, whereas case law from Saskatchewan has not.

Sole Proprietorships

If ownership of a business is transferred before death through a buyout, the resulting tax consequences may be reduced, depending on the terms of the sale. For example, structuring the purchase price as a promissory note payable over several years may spread the taxable capital gains resulting from the sale over a number of tax years. Starting in 2024, tax relief is also available for qualifying intergenerational business transfers that occur either immediately (within 36 months) or gradually, over five to ten years.

If a business or business assets are transferred through a will that is admitted to probate, probate fees or estate administration tax will be calculated on their value. In some jurisdictions, this may be avoided by transferring the business or assets through a secondary will that is not admitted to probate. This practice is permitted in Ontario and British Columbia, but may not be available elsewhere in Canada.

An option to purchase may not always operate as intended during estate planning. Their effectiveness may depend on the overall liquidity of the estate if unexpected debts arise. For example, in Hale v Stewart, 2025 ONSC 2275, options to purchase farmland contained in a will could not be honoured because the estate faced an unexpected tax liability arising from the deemed disposition of the farmland. Because the estate did not have sufficient funds to satisfy the tax liability, the gifted options to purchase had to abate to pay the tax liability. In this case, the purchase price set for the farmland was also significantly lower than fair market value; had the options to purchase been exercised, there still would have been insufficient funds to satisfy the outstanding taxes.

Partnerships

Upon the death of a partner, the partnership interest is generally deemed to be disposed of at fair market value immediately before death. Any resulting capital gain or loss will be reported in the deceased partner’s terminal income tax return.  If the partnership interest passes through a probated will or on intestacy, probate fees or estate administration tax will also be calculated on its gross value.

Where the estate acquires a partnership interest but does not become a member of the partnership, the estate is treated as holding a right to receive partnership property rather than a partnership interest. The estate’s cost for this right equals the proceeds of the disposition to the deceased partner’s estate. Because the right is not itself a partnership interest, the estate must recognise a capital gain once amounts received from the partnership exceed the adjusted cost base of that right.

If a partnership interest is left to a surviving spouse, common-law partner, or qualifying spousal trust, a tax-deferred rollover is available under the Income Tax Act.

Corporations

If corporate shares or assets are transferred through a secondary will that is not admitted to probate, probate fees or estate administration tax should not be calculated on that property. Where the property is administered under a will that is probated, however, it will be necessary to pay probate fees. Regardless of whether probate applies, capital gains tax may arise from the deemed disposition of the shares or assets at death. This tax is borne by the estate, rather than from the asset itself, subject to the terms of the will.

Where an estate freeze has been implemented, probate fees may be reduced and no immediate income tax will arise if the freeze is properly structured using rollover provisions under the Income Tax Act. Future growth will accrue to the new shareholders, while capital gains on the frozen shares will be deferred until a subsequent non-rollover disposition. Gains accrued before the freeze are not eliminated, however, and capital gains tax will generally become payable on the frozen shares upon the death of the original shareholder, albeit based on the reduced frozen value.

Planning vehicles commonly used in Canada for estate and wealth planning include the following.

• Inter vivos family trusts, which typically distribute income or capital to beneficiaries over time, and allow assets to pass outside of probate.
• Testamentary trusts, typically established under a will, which distribute wealth over time following the settlor’s death. These trusts can also provide protection to vulnerable beneficiaries.
• Alter ego trusts, a type of trust established under the Income Tax Act which allow taxpayers aged 65 or older to receive income from assets placed in the trust during their lifetime, on a tax-deferred basis. Following the settlor’s death, the remaining property is distributed to beneficiaries, outside of probate.
• Joint partner trusts, which function similarly to alter ego trusts but apply to married spouses or common-law partners.
• Charitable trusts, which typically provide income to family beneficiaries with the remainder passing to charity. These trusts tend to be tax efficient, as charitable donations generate tax credits.
• Private foundations, which may be funded by an individual, family, or corporation, and make grants to charities or operate charitable programmes. Private foundations are eligible for charitable donation tax credits, and allow donors to retain control over their charitable giving. They may also serve a branding function, when a family’s name is associated with the foundation.
• Public foundations, which are generally funded by unrelated donors and support collaborative or community philanthropy. Donations to registered charities generate tax credits, making donating to a public foundation attractive to both residents and non-residents (with Canadian tax exposure).

These estate and wealth planning tools may be used for a variety of reasons, including asset protection, reducing an estate’s tax burden – particularly probate fees or estate administration tax – and preserving privacy.

Trusts may currently be a less attractive planning vehicle in light of Canada’s enhanced trust-reporting regime, which generally requires trusts to file a T3 return and, where applicable, a Schedule 15 disclosing details regarding the beneficial owners of the trust property.

However, bare trusts have been exempted from these reporting rules for taxation years ending on or after 31 December 2024, and the 2025 federal budget has proposed deferring bare trust reporting so that it would apply only to years ending on or after 31 December 2026.

Pending enactment, Bill C-15, tabled in November 2025, also proposes to exempt trusts with less than CAD50,000 in total assets from filing a T3 return. Unlike the previous exemption for such trusts, which only applied to certain types of assets (like cash or government securities), the proposal contains no asset-type restrictions. As a result, many low-value or inactive trusts would not need to file annual returns, starting with the 2025 tax year.

Under Bill C-15, trusts would also be exempt from filing and providing detailed Schedule 15 information if the fair market value of their total assets does not exceed CAD250,000 throughout the year, provided that all trustees are individuals and all beneficiaries are individuals related to each trustee. To qualify, the trust may only hold low-risk assets, such as cash, bank-issued GICs, rights to income from those GICs, and specified exempt life insurance policies (valued at their cash-surrender value). This exemption would apply to many common family trusts that hold modest investment portfolios or personal-use assets. Proposed changes would also expand the definition of “related persons” to include aunts, uncles, nieces and nephews, thereby broadening the scope of permitted beneficiaries under the exemption.

In Canada, corporate fiduciaries must generally be licensed to serve as trustees. These requirements are province- and territory-specific, as each jurisdiction has its own statutory framework governing the trust relationship. For example, in Ontario, trust companies providing trust services to the public must be registered as per the Loan and Trust Corporations Act, RSO 1990, c L.25. In British Columbia, corporations are prohibited from carrying on trust business unless they are trust companies under the Financial Institutions Act, RSBC 1996, c 141. While corporate trustees may also be incorporated federally, trustees involved in succession and estate planning are generally governed by provincial law.

Professional trustees are not held to a higher standard of care than non-professional trustees. In Fales v Canada Permanent Trust Co, 1976 CanLII 14, the Supreme Court of Canada held that “the standard of care and diligence required of a trustee in administering a trust is that of a man of ordinary prudence in managing his own affairs and traditionally the standard has been applied equally to professional and non-professional trustees”. Although professional trustees may present themselves as possessing greater competence and expertise with trust administration, they remain subject to the same obligation to exercise reasonable skill and care in performing their duties.

Several Canadian jurisdictions permit the formation of private trust companies that do not offer services to the public, including New Brunswick, Ontario and British Columbia. This structure may be appealing for succession and estate planning, particularly for trusts containing substantial assets. In such cases, practitioners may establish a private trust company to act as trustee and manage the trust. Private trust companies do not offer services to the public, and instead typically operate for the benefit of specific families or limited groups, and are subject to different, generally less onerous regulatory requirements, though they must still comply with corporate law and fiduciary obligations.

By contrast, Alberta, Nova Scotia and Prince Edward Island do not appear to permit private trust companies that do not offer services to the public. Other provinces and territories do not specifically address private trust companies in their legislation. In jurisdictions without enabling legislation, establishing a private trust company may require federal incorporation under the Trust and Loan Companies Act, SC 1991, c 45 or reliance on general corporate law frameworks.

A trust administered by a trustee who is resident in Canada will be subject to taxation in Canada only if the trustee actually exercises central management and control of the trust in Canada. A trust’s residence does not necessarily correspond to the residence of its trustee. For example, a trust will not be resident where its trustee resides if the trustee only performs administrative functions and does not have responsibility for broader decision-making.

In Fundy Settlement v Canada, 2012 SCC 14, the Supreme Court of Canada confirmed that the residence of the trustee will be the residence of the trust so long as the central management and control test is met. In other words, the trustee must carry out the central management and control of the trust, and those duties must be performed where the trustee is resident.

As a general rule, the residence of the person exercising central management and control determines the residence of the trust. Accordingly, if the beneficiaries exercise central management and control and reside in Canada, the trusts will be considered resident in Canada.

If the trust is resident in Canada, it will be subject to Canadian tax on its worldwide income.

Succession laws across Canada have evolved significantly to recognise diverse family structures.

In Canada, succession rights are not affected by whether a marriage is between individuals of the opposite sex or the same sex. However, the succession rights of common-law partners vary by jurisdiction. In Ontario, for example, a surviving common-law partner has no succession rights under the Succession Law Reform Act, RSO 1990, c S.26, even if their partner dies intestate, although they may apply for dependant support from the estate of their deceased partner. Common-law partners are also excluded from sharing in intestate succession in Nova Scotia, Prince Edward Island, New Brunswick and Newfoundland and Labrador.

By contrast, intestacy rights have been extended to common-law partners in British Columbia, Alberta, Manitoba, Saskatchewan, Nunavut, the Yukon, and the Northwest Territories.

Children born out of wedlock generally have the same right to inherit from a parent’s intestate estate as children born to married parents, but do not have succession rights if their parent dies leaving a will. Distinctions based on legitimacy have been abolished in most provinces, including Ontario, Manitoba, New Brunswick, Alberta, Saskatchewan, British Columbia, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, and all of the territories.

If a child born out of wedlock is excluded from their parent’s will, they may be able to apply for dependant support from their parent’s estate or, in British Columbia, bring a wills variation claim following probate.

Adopted children have succession rights with respect to the estates of their adoptive parents, should they die intestate. However, adoption generally terminates succession rights with respect to the estates of their birth parents. Once an adoption order is granted, the adopted person becomes the child of their adoptive parent for all purposes, including succession, and ceases to be the child of their birth parents. An exception applies where a person adopts their spouse’s child, in which case the spouse is still the child’s legal parent, meaning the child will continue to have succession rights.

There is currently no legislation or case law which expressly addresses the succession rights of children born through surrogacy. It is generally expected that children born through surrogacy will be entitled to inherit from their intended parents’ estates, should they pass intestate. Entitlement to share in a birth parent’s estate may depend on whether parentage was legally relinquished through a surrogacy agreement, or written consent. If parentage was not properly relinquished, the birth parent or their estate may seek a declaration of non-parentage, although evidence may be required to show that the surrogate did not intend to assume parental status, as noted in ML v JC, 2017 ONSC 7179.

Posthumously conceived children only have succession rights in certain Canadian jurisdictions, including Ontario, British Columbia, Saskatchewan, Prince Edward Island, and Quebec, and only if applicable statutory conditions are met. For example, in Ontario, written notice must be provided to the Estate Registrar within six months after the death of the deceased, and the child must be born within three years of their death, although it is possible to apply to extend the time. Similarly, in British Columbia, notice of the intention to conceive must be given, and the child must be born within two years of the death of the deceased and also survive for at least five days. If the statutory requirements are satisfied, the child will inherit as if they had been born during the deceased’s lifetime.

As beneficiaries are not required to pay estate taxes on inheritances in Canada, this is generally not a concern for non-traditional family members who may exercise succession rights.

When considering the succession rights of non-traditional families, Canadian courts generally adopt a liberal approach to recognising foreign family relationships. For example, foreign divorces will usually be recognised if there is some real and substantial connection between one of the parties and the granting jurisdiction when the proceedings were commenced, which may impact a surviving spouse’s succession rights.

Conflicts may arise, however, and recognition may be refused if a foreign law is manifestly contrary to public policy. This issue has arisen in the context of foreign adoptions. If a foreign adoption has only limited legal effect, such as conferring succession rights, it generally will not be recognised as valid in Canada. Similarly, if a foreign adoption is designed to promote an immoral or mercenary object, it is unlikely to be recognised. However, where foreign adoption requirements simply differ from the requirements in Canada, courts will generally be reluctant to refuse recognition of a foreign adoption.

Conflicts may also arise where a Canadian in a non-traditional family dies intestate, owning immovable property in a jurisdiction that does not recognise non-traditional families. For example, if the deceased had a same-sex spouse, but the law where the immovable property is located does not recognise same-sex marriage, the property will be distributed in accordance with the law of that jurisdiction. Similar issues may arise with respect to common-law partners, children born outside marriage, adopted children, surrogate children, or posthumously conceived children.

Comparable issues may also arise where the deceased was domiciled in a foreign jurisdiction but had property in Canada. In such cases, the distribution of movable property located in Canada will be governed by the law of the deceased’s domicile.

As a result, family members in non-traditional families who are recognised as entitled to inherit in one jurisdiction may not be recognised in another.

Within Canada, conflicts rarely arise from differences between federal and provincial or territorial law with respect to recognition of family relationships. Typically wills and succession are governed by provincial and territorial legislation, rather than federal law. The only federal legislation that governs wills and estates is the Indian Act, RSC 1985, c I-5, which, where applicable, supersedes provincial and territorial succession laws.

Effective cross-border succession planning in Canada requires co-ordination between Canadian tax obligations with foreign tax systems to minimise double taxation.

Residents With Property Located Outside Canada

For Canadian residents who own property outside Canada, it is important to recognise that the deemed disposition of capital property that occurs on death applies to worldwide assets, including property located abroad.

Property located outside of Canada may also be subject to tax obligations in the jurisdiction where it is held, although tax treaties may provide some relief. For example, in 2025, under the Canada-US Tax Treaty, no US estate tax is payable if a Canadian’s worldwide assets are below USD13.99 million, although a non-resident estate tax return must still be filed. Canada currently has tax treaties with more than 90 countries.

Where a Canadian owns US real property, Canadian federal tax may also be offset through foreign tax credits where US estate tax is attributable to a US situs asset that is also subject to Canadian capital gains tax under the deemed disposition rule.

The foreign tax credit is generally available only for income taxes paid to a country with which Canada has a tax treaty and in which the individual is resident at the time of disposition. However, for income taxes relating to real property located outside Canada, the credit may also be claimed for taxes paid to the country where the property is situated, regardless of whether that country has a tax treaty with Canada.

Non-Residents with Property Located Inside Canada

For non-residents who own property in Canada, federal, provincial, and treaty laws impact testamentary dispositions. Although Canada does not impose an inheritance tax, non-residents are subject to Canadian income tax on capital gains arising from the deemed disposition of taxable Canadian property.

Before distributing estate property, the estate’s legal representative must comply with the clearance certificate requirements articulated in Section 116 of the Income Tax Act, and remit any taxes owing.

Estate Distributions to Non-Resident Beneficiaries

Estate distributions to non-resident beneficiaries may be subject to withholding tax. The estate representative must determine the applicable rate of the withholding tax on the portion of the estate or trust income payable to the non-resident beneficiary. If Canada does not have a tax treaty with the beneficiary’s country of residence, tax must be withheld at 25% of the gross payment. However, tax treaties may reduce this rate.

For example, the Canada-US Tax Treaty reduces the withholding rate on certain income distributions to US resident beneficiaries to 15%.

Transfers from Non-Residents to Canadian Residents

Transfers of capital property from non-residents to Canadians are generally taxed as if the parties were unrelated, regardless of any family relationship, and no tax-deferred rollover is available. Rollovers are also unavailable where one or both parties are not resident in Canada, for tax purposes.