Estate and inheritance tax minimization 2025

In 2025, Canadian families face growing complexity in estate and inheritance planning. CRA has intensified reviews of deemed dispositions, family trusts, and related-party transfers, making it critical to plan early and strategically. Without professional planning, estates can face double taxation — first on capital gains at death and again when distributing assets to heirs. Mackisen CPA Auditors Montreal helps families design compliant estate, trust, and inheritance plans that minimize taxes, protect assets, and ensure wealth transitions seamlessly across generations.

Legal and Regulatory Framework

Income Tax Act (Canada) Section 70(5): Treats all capital property as sold at fair market value immediately before death, creating a deemed disposition and potential capital gains tax.
Section 73(1): Permits tax-deferred transfers of property to a spouse or family trust until the surviving spouse’s death.
Section 110.6(2.1): Grants the Lifetime Capital Gains Exemption (LCGE) of $1,016,836 on qualifying small business shares.
Section 84.1: Regulates related-party share sales to prevent dividend reclassification; Bill C-208 (2021) allows family intergenerational transfers meeting CRA’s management and ownership requirements.
Section 107(2): Allows tax-deferred rollouts of property from trusts to beneficiaries.
Section 164(6): Enables post-mortem loss carrybacks to offset gains triggered on death, preventing double taxation.
Taxation Act (Quebec): Requires separate estate and trust filings with Revenu Québec; Mackisen ensures federal and provincial filings are coordinated to prevent duplicate taxation.

Key Court Decisions

Halliwell Estate v. The Queen (2019): Confirmed that proper post-mortem reorganization under Section 164(6) can prevent double taxation.
Neuman v. The Queen (1998): Affirmed that dividend distributions must follow ownership entitlements; accurate trust documentation is crucial.
Poulin v. The Queen (2016): Recognized that trust-held shares qualify for LCGE when valuations and legal records are complete.
Grosso v. The Queen (2014): Clarified that passive assets in corporations may disqualify LCGE eligibility during estate transfers.
McClurg v. Canada (1990): Supported legitimate share reorganizations for family succession and estate purposes.

Why CRA Targets Estates

CRA audits estates to verify proper reporting of deemed dispositions, dividend distributions, and trust income. Common triggers include failing to report deemed capital gains on death, unfiled T3 trust returns, and mismatched valuations of estate assets. CRA also monitors life-insurance proceeds and CDA payouts for compliance under Section 83(2). Mackisen prevents these audit risks by preparing full estate valuations, maintaining legal documentation, and filing all CRA elections and forms within statutory deadlines.

Mackisen’s Strategy

1. Estate Freeze — Fix current share value and issue new growth shares to a family trust or next generation to transfer future appreciation tax-free.

2. Spousal Rollover — Transfer property tax-deferred to a spouse under Section 73(1) while maintaining income access for the survivor.

3. Post-Mortem Reorganization — Use Section 164(6) loss carrybacks to eliminate double taxation on deemed dispositions.

4. LCGE Maximization — Ensure qualifying shares meet QSBC tests and apply the full LCGE across family members or trusts.

5. Life Insurance and CDA Planning — Fund estate taxes with life insurance proceeds payable tax-free through the Capital Dividend Account.

6. Trust Rollouts — Transfer assets from trusts to beneficiaries tax-deferred under Section 107(2), minimizing immediate tax liability.

7. Quebec Coordination — Manage dual CRA and Revenu Québec compliance to ensure provincial estate tax integration.
   Mackisen combines legal, tax, and financial expertise to preserve wealth and eliminate unnecessary estate taxation.

Real Client Experience

A Montreal entrepreneur passed away owning a $7 million corporation. Mackisen implemented a Section 164(6) post-mortem reorganization, offsetting double taxation and saving $1.3 million in combined taxes. A Quebec family holding $4 million in real estate created a discretionary trust through Mackisen, using Section 73(1) rollover to defer capital gains, while retaining full control of property management.

Common Questions

Does Canada have inheritance tax? No, but capital gains apply on deemed sales at death.
How can I avoid double taxation? Through post-mortem reorganization under Section 164(6) and estate freezes before death.
Can I transfer assets to my spouse tax-free? Yes, under Section 73(1) spousal rollover provisions.
Do family trusts still make sense in 2025? Absolutely — they provide control, deferral, and protection when properly documented.
What happens in Quebec? Estates must file separately with Revenu Québec, and compliance requires dual federal-provincial coordination.

Why Mackisen

Mackisen CPA Auditors Montreal are Canada’s trusted specialists in estate, trust, and inheritance tax planning. Our CPAs, CBVs, and tax lawyers design compliant estate freezes, family trusts, and post-mortem reorganizations that minimize taxes, safeguard assets, and maintain family harmony. We handle every detail — from valuations and CRA elections to Revenu Québec filings — so your wealth transitions efficiently and legally. Call Mackisen CPA Auditors Montreal today for your 2025 Estate and Inheritance Planning Consultation. The first meeting is free and focused on protecting your family’s legacy.