Written by: Zachary A. Fischer How Your Estate Is Taxed in Canada Although Canada does not have “estate taxes” in the traditional sense, your estate is taxed under a “Terminal Return”, which functions much like an Income Tax Return. All income, capital gains, RRSPs, etc., are considered income in the terminal year. This can result in taxation at the highest tax rate, which may significantly reduce the funds available to be distributed to your beneficiaries. If your Estate continues to generate income while it is being administered, the Estate will likely continue to face tax liabilities. If you and/or your spouse are US citizens, or if you own property/assets in the United States, your Estate may be liable for significant US Estate taxes. How Can You Minimize the Tax Liability of Your Estate? There are a number of ways to limit the tax burden on your Estate’s tax liability, such as ensuring that your assets fall outside of your Estate and are not considered taxable under the terminal return. For example, you may consider making inter-vivo gifts that is, distributing some of your assets through gifts while you are still alive. Estate planning should always be done in consultation with both a lawyer and an accountant to ensure that your plan is tailored to your personal and financial circumstances. At Parlee McLaws LLP, our Wills and Estates team can work with your accountant to best protect your assets.