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What Does the CRA Consider Inheritance Money? In general, the CRA doesn’t consider money or assets you inherited as taxable income, which means that you don’t have to report it.

BC does not have an inheritance tax, so you do not personally pay tax just for receiving money or assets. However, this doesn’t mean taxes aren’t a significant factor when inheriting.  

Is There an Inheritance Tax in British Columbia? No, there is no official inheritance tax in British Columbia or anywhere in Canada. That means if you receive an inheritance, you generally don’t pay tax on what you receive.

Certain assets have built-in tax advantages or direct beneficiary designations, and adding a trust can alter or cancel those benefits. 

For example, registered accounts like RRSPs and TFSAs, life insurance policies with named beneficiaries, vehicles, and pensions are not the ideal fit for a trust. In addition, if you put your home in a trust, it may limit the principal residence exemption if the trust doesn’t meet certain rules.  

To find out more about trusts in Canada, keep reading.

A family trust in British Columbia is a legal arrangement where the settlor puts money or property into a trust and appoints others (trustees) to manage it for the benefit of family members (beneficiaries). 

To set up a basic trust, you will likely pay around $2,000–$5,000 in BC. However, it is important to understand that costs vary significantly depending on the trust’s complexity.

Is there a limit to how much money I can put in a trust? In Canada, there is no legal limit on how much money or how many assets you can place into a trust. The amount is not capped, but tax rules apply when assets are transferred into the trust.

In Canada, most personal trusts, such as family trusts, are subject to a 21-year deemed disposition rule under the Income Tax Act. The 21-year rule means that the trust is deemed to have sold its assets after 21 years. This can trigger capital gains tax unless assets are distributed or other planning is done.

I was recently speaking with clients who decided to use a trust as part of their estate plan. I want to share a little bit about why a trust worked for them so you can see if any of their goals and concerns align with yours.  This couple has a high net worth, multiple real estate properties, and investment portfolios. They want to pass their assets to their two daughters and future grandchildren.  Their goal was to transfer some of their wealth while they were alive and have a plan for how the rest of the assets would be distributed after their death. They chose to use a trust to retain control over when and how the assets are distributed…

The main reason to avoid a trust is if your estate is simple. You don’t benefit from the added costs and complexities if your estate is simple. In addition, if you don’t want to lose control of the assets, then a trust may not be a fit for you.