Land Transfer Tax on Inherited Property in Ontario

Learn about Ontario's Land Transfer Tax on inherited properties. Contact TDJ Law for trusted advice from a real estate lawyer.

Written By

Todd Ji, real estate lawyer

Todd Ji

Published On

June 25, 2023


In Ontario, like in many other jurisdictions, real estate transactions often come with a tax commonly known as the Land Transfer Tax (LTT). This tax applies when property changes hands, but how does it affect those who inherit a property? Let’s explore the application of the Land Transfer Tax on inherited property in Ontario with advice from a real estate lawyer.

Understanding the Basics of Land Transfer Tax (LTT)

The Land Transfer Tax is a provincial tax imposed on the exchange of real estate from one party to another. When a property is sold, purchased, or otherwise transferred, the government assesses a tax based on the value of the property. The primary purpose of the LTT is to contribute to public funds and municipal resources.

Land Transfer Tax and Inherited Property: The General Rule

Typically, when property ownership is transferred, LTT applies. However, there is an exemption for inherited properties. In Ontario, if you inherit a property due to the death of the owner, you generally are not required to pay LTT. This exemption also extends to property transferred to a spouse as a result of a separation agreement or a court order.

Factors Affecting the Application of LTT on Inherited Property

While the exemption for inherited properties seems straightforward, there are some scenarios where LTT might still apply:

The Nature of the Will

If the will of the deceased doesn't directly transfer the property to a beneficiary but instead instructs the executor to sell the property and distribute the proceeds, then the LTT may apply. This is because the property is technically transferred to a new owner, who would need to pay the tax.

Multiple Beneficiaries

In situations where a property is left to multiple beneficiaries, a transfer of ownership between beneficiaries (one beneficiary buying out the others) could attract land transfer tax. The tax would be applicable on the value of the property share being transferred between the beneficiaries.

Beneficiary Outside of Ontario

For beneficiaries who live outside Ontario, the property will still be exempt from land transfer tax upon the initial inheritance. However, if they decide to sell the property, the purchaser will have to pay the LTT.

Estate Planning and the Role of Land Transfer Tax

Given the potential complexities of dealing with inherited property, having an efficient estate plan is crucial. Not only can it help minimize the overall tax liability, but it can also ensure a smooth transition of property ownership. Consider discussing your estate plan with a legal expert to understand the implications of LTT and other potential taxes better.

Consult with a Professional

Navigating the intricacies of Land Transfer Tax, especially when dealing with inherited property, can be daunting. While this guide provides a general overview, each individual situation is unique and might have specific considerations that aren't universally applicable.

Contact TDJ Law to Speak to a Real Estate Lawyer in Ottawa

When it comes to dealing with inherited property and understanding the ins and outs of land transfer tax in Ontario, professional advice is invaluable. If you need assistance in Ottawa, get in touch with TDJ Law. Our team of experienced real estate lawyers can help you navigate through the process, ensuring you understand your obligations and potential liabilities, saving you time, money, and stress. Don't hesitate to secure the expertise you need to handle your real estate inheritance in the most efficient way possible, and contact TDJ Law today.