Quebec and Canada have no formal inheritance tax — but deemed disposition rules mean significant taxes often arise on death.
Deemed Disposition at Death
When a person dies, they are deemed to have sold all their property at fair market value. This creates capital gains on stocks, investment properties, vacation homes, and private business shares. RRSPs and RRIFs are included in the deceased's income in full — potentially creating a massive tax liability unless there is a qualifying spousal beneficiary.
The Spousal Rollover
Assets transferred to a surviving spouse roll over at cost — no immediate tax. This defers all capital gains and RRSP income until the surviving spouse disposes of assets or dies.
What Heirs Receive
Beneficiaries receive inherited assets at the estate's cost base after taxes are paid by the estate — if you inherit shares, your cost base is the fair market value on the date of death (the stepped-up basis).
Quebec Estate Administration
Quebec follows civil law, not common law. Estate settlement requires a notarized will or legal heir verification. The liquidator files a final T1 and TP-1 for the deceased, plus a T3 trust return if the estate earns income during settlement.
Planning Ahead
Insurance, trusts, gifting strategies, and charitable bequests can significantly reduce estate taxes. The most valuable planning happens years before death.