At a glance
- Key tax implications that can impact your estate planning
- Common planning strategies and objectives
- Considerations across major asset types
- Practical insights to support wealth transfer and family outcomes
Estate planning is often misunderstood as simply drafting a will. In reality, estate planning is the coordinated process of organizing your financial affairs and legal arrangements so you can protect your family and your wealth during your lifetime, and ensure your wishes are carried out efficiently and tax‑effectively in the future.
If you have built wealth in your career, your estate can face significant taxes and costs, especially if you have investment portfolios with accrued gains, registered plans, a cottage or rental property, or cross‑border assets. A well‑designed plan can reduce surprises, improve fairness among beneficiaries, and help preserve your legacy.
This article addresses estate planning for executives and other individuals with private wealth, but who do not own their own business. See our article, Estate planning for owner managers: Protecting what you’ve built, for concerns specific to owners of private businesses.
Common estate planning objectives
Although estate plans differ, most people have similar main objectives:
Preserving wealth and lifestyle
Estate planning begins by making sure you have sufficient income and assets to maintain your desired lifestyle, both during your working years and throughout retirement. It also includes managing risk, for example, market volatility, unexpected illness, or long‑term care needs.
Minimizing and deferring taxes
For many people, the largest tax liability they will ever face arises on death. Estate planning can help reduce or defer taxes and ensure that there are enough liquid assets available to pay them.
Key tax considerations include the following:
Deemed disposition at death can trigger significant income taxes
You are generally considered to have disposed of your assets, such as investments and real estate, at fair market value immediately before death, which can trigger substantial taxes.
Registered accounts can create a tax spike
Registered accounts can create the biggest surprise. On death, the value of your registered retirement savings plan (RRSP), or registered retirement investment funds (RRIF), is included as income in your final tax return unless it is eligible for tax-deferred rollover treatment in specific circumstances.
Probate fees are separate from income tax
Probate is a legal administration process by a provincial court under which your will is validated and your executor, as named in your will, is granted the authority to administer your estate. Probate fees vary by province and can be considerable for larger estates. Probate fees are often levied based on the fair market value of certain property owned by the deceased that passes under a will. Especially in provinces that impose high probate fees, such as Ontario, probate planning is an important part of an estate plan.
Providing for family
Estate planning ensures your spouse, children, and dependents are provided for in a way that reflects your intentions. This can include balancing support for a spouse with preserving capital for the next generation or managing blended-family dynamics.
Philanthropy
Many families want to support charities in a tax‑efficient way, during life or through the estate. With careful structuring, charitable giving can reduce taxes while supporting the causes you care about.
Key estate planning strategies and tools
Estate planning solutions are tailored to personal needs, but several tools are often used.
Wills and powers of attorney
A well-prepared will ensures that your assets are distributed in accordance with your intentions and that an appropriate individual is appointed to administer your estate. Powers of attorney allow trusted individuals to manage your financial affairs and personal care decisions if you become incapacitated.
It’s important to note that your will, powers of attorney, and beneficiary designations should be reviewed together to prevent unintended outcomes.
Registered accounts
At death, you are deemed to have disposed of any RRSPs and RRIFs that you have. As a tax deduction was available on your contributions to an RRSP, and earnings in an RRSP and RRIF are not taxable, the full value of your RRSPs and RRIFs at the time of death will be included in income on your final tax return. However, if your spouse or common-law partner or financially dependent child or grandchild is the beneficiary of these plans, a tax-deferred rollover may be available until such time as funds are withdrawn or the death of these specific beneficiaries.
If your spouse or common-law partner is named as a successor holder of your tax-free savings account (TFSA), the account's funds can be transferred directly to their TFSA upon your death. If another beneficiary, such as a child, is named, the funds can go to them tax-free. In most provinces, naming a beneficiary means the TFSA funds will not form part of the estate, allowing them to bypass probate.
As noted above, key considerations include:
- Who is named as beneficiary in the plan documents?
- Does your plan maximize rollover opportunities where available?
- How will tax be funded if registered accounts are taxable on death?
Real estate
Real estate is often a family’s largest asset and sometimes its largest tax exposure. Important points to keep in mind:
- A principal residence exemption can be claimed on the sale of your main home, or on a secondary residence that you use personally. The principal residence exemption can eliminate or reduce the capital gains tax on a designated principal residence, but you can generally designate only one property per family unit.
- If you own a second property (such as a cottage) or a rental property, accrued gains may be taxable on sale or on deemed disposition at death.
- If you own both a home and a cottage, which property you designate as your principal residence in order to claim the exemption, and for which years, can materially change the tax result.
In addition, the change in use of a property from a principal residence to a rental property (or vice versa), as well as the short-term ownership of a residential property, adds complexity to the tax planning for real estate.
Stock options
If you participate in an employer stock option plan, your plan may automatically become invalid on death. However, if your plan survives death and you die owning unexercised stock options, key tax considerations include the following:
- A stock option benefit is deemed to have been earned at the time of death. This benefit is determined as the value of the option immediately after the death, minus any amount paid to acquire the option.
- If your estate exercises the option within the first three taxation years, there may be an opportunity to reduce the deemed stock option benefit recognized on your final return by 50%.
- Should the shares, after subtracting the option price, turn out to be worth less than the benefit included in income at death and are later sold at a loss during the same three-year period, your estate can carry the loss back to your final tax return. The ability to carry back this loss depends on the option’s exercise or disposition qualifying for the 50% reduction as noted above.
Charitable giving
Charitable giving can be one of the most tax efficient estate planning strategies. In addition to a non-refundable donation tax credit, if you donate publicly listed securities to a registered charity or other qualified donee, you may be exempt from capital gains tax on the gain realized on the gift (subject to conditions). This means that donating securities in-kind (instead of selling and donating cash) can help preserve more value for your chosen charity and can reduce taxes. Read more in our article: How donating securities to charity saves you tax.
Note that the rules for charitable bequests (gifts provided for in a will) are slightly different than the rules for charitable gifts given during your lifetime. These rules are discussed in our article: Making a charitable donation in your will? Know the tax implications.
Insurance planning
Insurance is often used to provide liquidity to pay taxes on death, equalize inheritances, or fund charitable bequests. This is especially important when much of a family’s net worth is tied up in real estate or investments that may not be easy or advisable to sell quickly.
Inter-vivos trusts
Trusts can provide many benefits and are often an important part of a thoroughly designed estate plan.
Certain trusts, such as an alter ego or joint partner trust, are created during an individual’s lifetime. Provided that the settlor (i.e., individual contributing the assets to the trust) is at least 65 years old, and other conditions are met, they can transfer property to the trust on a tax-deferred basis. These trusts can last until the settlor’s death, or for a joint partner trust, the trust can last until the death of the surviving spouse. When the trust ends, there will be a deemed disposition of the assets in the trust, which is a taxable event.
With careful consideration, these trusts can offer a range of planning benefits, including:
- avoiding probate fees, as assets are transferred to the trust during the settlor’s lifetime and do not become part of the deceased’s estate,
- ensuring a smooth transition of assets in the event of incapacity and death,
- providing asset protection, as assets held by the trust can be protected from creditor claims,
- allowing control and certainty after death, such as by specifying income distributions, preserving capital for future generations, and allocating certain assets to different family members; and
- providing privacy, as trust assets and documents can be kept confidential, contrary to a will that goes through the probate process, as once probated, wills become public records.
Keep in mind that trusts are powerful but complex. It is prudent to work with an experienced tax professional and lawyer.
Other considerations
The above discussion covers some common income tax considerations when drafting an estate plan. However, it does not consider any international tax issues that could occur where assets are held outside of Canada, or, in the case of a U.S. citizen, any U.S. tax considerations. If you are not a U.S. citizen, live in Canada, and own U.S. assets such as real estate or securities, further information on U.S. estate tax is provided in our bulletin: U.S. estate tax issues for Canadians.
In addition, the rules for trusts and some aspects of registered plans are different in Quebec from those in the other provinces, and such differences are not within the scope of this article.
How BDO helps
As demonstrated above, there are many issues to consider in an estate plan, and many areas where tax pitfalls can be costly. However, estate planning starts with communication with your family and your advisors to craft a plan that fits your objectives.
Estate planning works best when your tax, legal, and financial advice is coordinated. Your BDO advisor has the knowledge and experience to work with you and your advisors to create an estate plan that works now, and in the future.
The information in this publication is current as of April 14, 2026.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.