Key points
- At death you are deemed to sell your capital property, including private company shares, at fair market value. Property left to a spouse or common-law partner in Canada generally rolls over without tax until they sell or die.
- The lifetime capital gains exemption ($1,275,000 for 2026) may shelter part of the gain on qualifying small business shares, if the shares meet the tests on the day of death.
- Probate is a separate cost: in BC $14 per $1,000 above $50,000; in Alberta a court fee of at most $525.
- Owners use an estate freeze, sometimes a family trust, a buy-sell agreement and often life insurance to cap, share and pay the tax.
- The legal documents are the lawyer's; the tax estimate, the records and the returns are the accountant's. The plan works best when both see it.
What happens for tax when you die
Canada has no estate tax or inheritance tax. Instead, the CRA treats you as having sold all your capital property immediately before your death at its fair market value: shares of your company, rental and recreational property, non-registered investments, crypto-assets and valuable personal items. Any gain is reported on your final return, as if you had sold everything on that day. RRSPs and RRIFs are generally included in full in the final return too, unless they pass to a spouse or a qualifying dependant.
For a business owner this is often the largest tax bill of their life, and it arrives when nobody has sold anything and there may be no cash to pay it.
Round numbers, for illustration only. An owner started a company with $100 of shares. Thirty years later the shares are worth $3,000,000, and the owner dies leaving them to adult children. The final return reports a capital gain of about $3,000,000. Half of a capital gain is taxable, so about $1,500,000 is added to the owner's income in the year of death, less any lifetime capital gains exemption claimed if the shares qualify. The estate has to pay that tax before the shares can be fully distributed, even though the children have received shares, not cash.
The spousal rollover
Property left to a spouse or common-law partner who is resident in Canada, or to a qualifying spousal trust, generally passes at its tax cost, so no gain is reported on the final return. The property has to vest in the spouse or the trust within 36 months of the death. The gain is not forgiven: it is deferred until the spouse sells the property or dies. The executor can also elect out of the rollover for particular property, for example to use up losses or the deceased's capital gains exemption on the final return.
The lifetime capital gains exemption
Gains on shares of a qualified small business corporation can be sheltered by the lifetime capital gains exemption, $1,275,000 for 2026. The shares must meet the tests at the time of death, including the asset tests (mostly active business assets) and the 24-month holding tests. A company that has built up a lot of investments can fail the tests without anyone noticing. The capital gains guide explains the exemption, and the holdco or opco guide explains why owners sometimes move surplus out of the operating company.
The final return and its deadline
| Date of death | Final return due |
|---|---|
| January 1 to October 31 | April 30 of the following year, for filing and for paying any balance owing |
| November 1 to December 31 | Six months after the date of death, for filing and for paying any balance owing |
| The person, or the spouse living with them, was operating a business | Filing by June 15 of the following year (six months after the death if it was between December 16 and 31); the payment date above does not change |
The executor may also file optional returns for certain income, and the estate itself files trust returns (T3) for income earned after the death. Shares in a private company held by the estate can need post-mortem planning in the estate's first year to avoid the same value being taxed twice; that work has deadlines, so the executor should talk to the accountant early.
Probate fees in BC and Alberta
Probate is the court process that confirms the will and the executor's authority. Banks and land title offices usually ask for it before they release or transfer assets in the deceased's name alone. The fee is set by each province.
| Province | How the fee is worked out | Example: $800,000 estate |
|---|---|---|
| British Columbia Probate Fee Act, s. 2 | Nil if the estate is $25,000 or less. Otherwise $6 for every $1,000 (or part) between $25,000 and $50,000, plus $14 for every $1,000 (or part) above $50,000. Based on the gross value of BC property, and for a BC resident, intangible property anywhere, that passes through the estate. | $150 + $10,500 = $10,650, plus court filing fees |
| Alberta Surrogate Rules, Schedule 2 | By the net value of property in Alberta: $35 up to $10,000; $135 up to $25,000; $275 up to $125,000; $400 up to $250,000; $525 over $250,000. | $525 |
Assets that pass outside the will usually don't count: property held in joint tenancy with right of survivorship, and RRSPs, RRIFs, TFSAs and life insurance with a named beneficiary. In BC, where the fee is a percentage, that is one reason owners hold some assets jointly or name beneficiaries, and why some use a second will for private company shares. Each of these has its own legal and tax risks, so they are decided with a lawyer, not to save a fee alone.
The estate freeze
An estate freeze caps the value of the owner's shares today, so that future growth, and the tax on it, belongs to someone else.
- The owner exchanges their common shares for preferred shares with a fixed redemption value equal to what the company is worth now. A tax provision lets this happen without tax at the time.
- The company issues new common shares for a nominal amount to the next generation, or to a family trust for them.
- From then on, growth in the company's value goes to the new common shares. The owner's tax on death is based mostly on the frozen value of the preferred shares, which they can also redeem gradually to live on.
The owner can keep control through voting preferred shares. A freeze needs a proper valuation and careful drafting, a price adjustment clause, and an updated securities register and minute book. Done when the company is worth less, it shifts more growth.
Family trusts and the 21-year rule
A family trust is often the shareholder that takes the new common shares in a freeze. The trustees hold the shares and decide later which beneficiaries benefit, which keeps flexibility when children are young. But a trust is a separate taxpayer with its own return every year, the tax on split income limits paying income to family members, and a trust is generally treated as selling its capital property at fair market value every 21 years. Trustees plan for that date well ahead, often by distributing the shares to beneficiaries before it. A trust needs a lawyer to set up and an accountant every year.
Buy-sell agreements and succession
If you have business partners, the most practical estate document may be the shareholders' agreement. Its buy-sell clauses say what happens to a shareholder's shares on death, disability, retirement or a falling-out: who must buy, who must sell, how the price is set and how it will be paid. Without one, a surviving partner may find themselves in business with a spouse or an estate that needs cash, not shares.
Life insurance is commonly used to fund a purchase on death. The policy can be owned by each shareholder on the others, or by the company, in which case the capital dividend account can matter; see corporate-owned life insurance. How the agreement is written changes who pays the tax and how much, so it is drafted by a lawyer and reviewed by the accountant before it is signed, and reviewed again when the company's value changes.
Succession is more than tax: who will run the business, whether children not in the business are treated fairly (insurance or other assets can equalise an estate), and whether key staff and clients will stay.
Where insurance fits
Insurance doesn't reduce the tax on death; it provides the money to pay it, or to fund a buy-sell, or to leave something to the children who don't take over the business. A joint last-to-die policy is sometimes used for couples, since the large bill often arrives on the second death, after the spousal rollover. The death benefit itself is generally received tax-free (see the life insurance guide). The CPP death benefit is small by comparison: a one-time $2,500, with a possible $2,500 top-up for deaths from 2025 in some cases.
The documents every owner needs
- A will that names an executor able to deal with a company, says who gets the shares, and fits the shareholders' agreement.
- A power of attorney for finances, so someone can act if you can't. In BC, health and personal care decisions are covered by a representation agreement; in Alberta, by a personal directive.
- A shareholders' agreement with buy-sell terms, if you have partners.
- Up-to-date corporate records: the securities register, share certificates and resolutions, so the executor can prove what you owned.
- Beneficiary designations on RRSPs, RRIFs, TFSAs and life insurance that match the will.
- A list of accounts, advisors, passwords stored safely, and where the documents are.
Common mistakes
- No idea what the tax on death would be, and no plan to pay it.
- A will written before the company existed, or one that conflicts with the shareholders' agreement.
- Beneficiary designations that no longer match the family (an ex-spouse still named).
- No power of attorney, so nobody can sign for the company or the bank if the owner is incapacitated.
- Corporate records that don't show who owns the shares.
- Assuming the shares qualify for the lifetime capital gains exemption without checking the asset tests.
- A plan made once and never reviewed after a marriage, a separation, a sale or a big change in value.
How Finvo helps
We cover the tax side of an owner's estate plan: estimating the tax that would be due on death today, checking whether the shares are likely to qualify for the exemption, keeping your corporate records and securities register current, and preparing the final return and the estate's returns through our tax services. For an estate freeze or a trust, we work alongside your lawyer on the tax figures and the records, as part of a business membership or tax-side planning.
Finvo itself does not sell insurance. If you need insurance advice, we can connect you with a licensed agent from our partner network; the agent advises on products and coverage, and we cover the tax side. Insurance and other specialists are joining Finvo as contractors, so a group of consultants can work on your file together. Wills, powers of attorney, agreements and trusts are legal documents: this guide is general information, not legal advice, and we work alongside your lawyer.
This guide is general information for business owners in BC and Alberta, checked against the CRA's pages, the BC Probate Fee Act and the Alberta Surrogate Rules on 30 Oct 2026. Rules have exceptions and can change; it isn't legal, tax or insurance advice for your situation.