Tax at Death in Quebec: complete guide 2026

The Deemed Disposition

At death, the taxpayer is deemed to have disposed of all their property at fair market value (FMV) immediately before death. This triggers the realization of all accumulated capital gains (or losses).

Affected assets include: • Shares and non-registered investments • Real estate (except the principal residence) • Shares of private corporations • Depreciable property (recaptured depreciation) • Any other capital property

The principal residence benefits from a full exemption if it has been designated as the principal residence for each year of ownership.

RRSP/RRIF at Death

At death, the full value of the RRSP or RRIF is included in the deceased's income on their final tax return and taxed at the marginal rate.

On an RRSP/RRIF of $500,000, the tax can easily exceed $250,000 at the highest marginal rate in Quebec.

Exceptions: • Spousal rollover: if the spouse is the named beneficiary or heir, funds may be transferred to their own RRSP/RRIF without immediate tax • Financially dependent child or grandchild: transfer possible under certain conditions • Disabled child: transfer to a Registered Disability Savings Plan (RDSP)

The Spousal Rollover

The spousal rollover is the primary tax-deferral mechanism at death:

• Capital property is deemed transferred to the surviving spouse at its adjusted cost base (not at FMV) • The RRSP/RRIF can be transferred to the spouse's own RRSP/RRIF • The TFSA can continue via a successor holder

This is not an elimination of tax, but a deferral. At the death of the surviving spouse, the deemed disposition will apply with no possibility of a further spousal rollover.

A qualifying spousal trust (also called an exclusive benefit spousal trust) can also allow the rollover while maintaining control over how assets are ultimately distributed.

The Role of Life Insurance

Life insurance is the most effective planning tool for covering taxes at death:

• Tax-free death benefit to pay the tax bill • Immediate liquidity (estate assets may be illiquid) • With a named beneficiary designation, funds are paid outside the estate

Example: a client holds a $2,000,000 portfolio with $1,000,000 in accrued capital gains. At death (no surviving spouse), the tax on the gain would be approximately $250,000. Without liquidity, heirs could be forced to sell assets urgently. A $250,000 policy solves the problem cleanly.

Frequently Asked Questions