What to Do with an Inheritance in Ontario
What to Do with an Inheritance in Ontario: Making the Most of a New Opportunity
“Inheritance planning isn’t just about receiving money — it’s about understanding the rules that shape it and using the right guidance to turn it into long-term security.” — Bill Craven, CFP®, EPC
An Important Financial Milestone
Receiving an inheritance is an important milestone in a person’s life. It often arrives at a time when emotions and practical decisions intersect, creating both opportunity and uncertainty.
For many Canadians, an inheritance marks the first time they need to think beyond the basics of debt repayment or RRSP and TFSA contributions. It’s the moment when questions shift from “Where should I put this money right now?” to “How do I invest and protect it for the long term — and who should guide me?”
Handled thoughtfully, an inheritance can become more than a one-time deposit. It can be the foundation for a smarter, more tax-efficient investment plan that supports your retirement, protects your estate, and ensures the legacy left to you continues to grow.
As I often tell clients: “An inheritance is not just money in an account — it’s a chance to reset your financial path with clarity and purpose.”
Step One – Pause Before You Spend
When an inheritance arrives, it’s natural to feel the urge to act quickly; whether that means paying down debt, making a purchase, or jumping into investments. But the wisest first step is often the simplest: pause.
An inheritance carries more than dollars. It reflects years of work and sacrifice, and it often arrives at a time of loss. Giving yourself time to process both the emotional and financial sides helps prevent rushed choices that might create regrets later.
During this pause, focus on clarity:
- Confirm exactly what has been inherited — cash, investments, property, or a mix.
- Understand the probate process and any taxes that may apply before funds reach you.
- Consider how this inheritance aligns with your broader goals, not just today’s needs.
I often remind clients: “An inheritance is part of a legacy, not just a deposit. Taking time to reflect ensures you make decisions that honour both the person who left it to you and the goals you hold for the future.”
Q&A: Should I spend my inheritance right away?
Answer: In most cases, no. Acting too quickly can create regrets later if taxes, probate, or better investment opportunities are overlooked. Taking a pause allows you to confirm what you’ve inherited, understand the costs involved, and make decisions that support both your immediate needs and your long-term financial goals.
“Treating an inheritance as ‘found money’ is one of the costliest mistakes people make. The pause is what gives you control.” Bill Craven
Step Two – Understand the Tax Realities
Canada does not have an inheritance tax. That means the money you receive from a parent or loved one does not get added to your income in the year you receive it. But that doesn’t mean taxes aren’t part of the picture. They just appear earlier, inside the estate, before funds reach you.
Here’s what to know in Ontario:
- Probate (Estate Administration Tax): Estates over $50,000 pay about 1.5% on the value above that threshold. This is paid by the estate, not the beneficiary, but it reduces the total available for distribution.
- RRSPs and RRIFs: Registered accounts are usually taxable on the deceased’s final return unless they transfer to a spouse or certain dependent children. For other beneficiaries, the value is included in the estate’s taxable income.
- Deemed disposition: Non-registered investments and property are treated as though they were sold immediately before death. Any accrued capital gains are reported on the deceased’s final return. (Certain rollovers to spouses can defer this.)
For beneficiaries, this means the inheritance typically arrives net of these taxes and fees. Understanding them is the setup before investing decisions — it helps you see what you’re truly starting with and avoids surprises later when planning.
“The inheritance that arrives in your hands has already been shaped by taxes. The key is to understand what’s left, then make the smartest decisions going forward.”
Q&A: Is inheritance taxable in Ontario?
Answer: Not directly. Canada does not charge inheritance tax, and you don’t report inherited cash as income. However, Ontario estates over $50,000 pay probate fees, and estate assets like RRSPs or investments may be taxed before distribution.
Tax Realities at a Glance
When you receive an inheritance, the real question isn’t “Is it taxable?” but “How will future income from it be taxed?” Here’s a quick comparison of how different account types treat investment income in Canada:
Income Type | Non-Registered Account | TFSA | RRSP |
Interest | Fully taxable at your marginal rate | Tax-free | Tax-deferred; withdrawals fully taxable |
Eligible Dividends | Gross-up & dividend tax credit applies | Tax-free | Tax-deferred; withdrawals fully taxable |
Capital Gains | 50% of the gain included in income (current CRA rules through 2025) | Tax-free | Tax-deferred; withdrawals fully taxable |
Withdrawals | Withdrawals-Taxed annually AND personal capital gains payable on withdrawal. | Anytime, tax-free | Taxable when withdrawn |
Beneficiaries | None (flows through estate; probate may apply) | Use successor holder for spouse and beneficiary for all others. | Yes, with rollover provisions for spouse. |
Sources:
- Canada Revenue Agency – Capital gains inclusion rate
- Government of Ontario – Estate Administration Tax
- CPA Canada – Tax and inheritance overview
Important note: This table is for general educational purposes only. It is not tax advice. Bill Craven is a Certified Financial Planner® who focuses on helping clients structure inheritances and investments with clarity. For personalized tax advice, always consult a licensed accountant or tax professional.
Step Three – Build the Foundation: Debt & Registered Accounts
Before exploring advanced investment strategies, it’s important to take care of the basics. An inheritance can be an opportunity to strengthen the foundation of your financial plan in three clear layers:
- Eliminate high-interest debt
Carrying credit card or personal loan balances at 15–20% interest is one of the biggest drags on long-term financial health. Using inheritance money to clear this debt creates an immediate, risk-free return — the interest you no longer pay. - Maximize your TFSA
Once debt is cleared, the Tax-Free Savings Account is usually the next priority. Growth inside a TFSA is tax-free, and withdrawals never create taxable income. This makes it one of the most powerful tools for long-term investing, especially when an inheritance gives you the room to contribute more. - Contribute to your RRSP (if you have room)
RRSP contributions reduce your taxable income today and allow investments to grow on a tax-deferred basis until retirement. This can be especially effective if you are in a higher tax bracket at the time of receiving your inheritance.
Taken together, these three layers build security and flexibility. Debt elimination protects cash flow, TFSA growth builds accessible wealth, and RRSP contributions strengthen retirement planning.
“The first steps are about securing your base. Clearing debt and making the most of your TFSA and RRSP are like locking the doors and windows before you add a new addition to your house.” Bill Craven
Q&A: Should I pay debt or invest with my inheritance?
Answer: If the debt is high interest, paying it down first almost always makes the most sense. Once that’s cleared, using your TFSA and RRSP to invest for the future creates tax advantages that grow over time. In many cases, the best strategy is a mix — some for debt repayment, some for registered investing.
Once these foundations are covered, many Canadians encounter something new for the first time — the open, or non-registered account. This is where inheritance money often becomes the starting point for more advanced, tax-efficient investing.
Step Four – The Non-Registered Frontier
For many Canadians, an inheritance is the first time they move beyond TFSAs and RRSPs into an open or non-registered account. This is a different world; one without contribution limits, but also without the built-in tax sheltering or beneficiary designations of registered plans.
Handled properly, non-registered investing can be one of the most rewarding stages of wealth building. But it is also more complex, which is why this is often the moment clients move from DIY or bank branch advice to the guidance of an experienced financial planner.
Why Non-Registered Accounts Matter
- No contribution limits – flexibility to invest larger amounts.
- Estate complexity – no direct beneficiary designations, so assets usually flow through the estate (probate applies).
- Tax efficiency becomes essential – the way income is generated matters more here than anywhere else.
“After debts are gone and TFSAs are filled, the next step is almost always a non-registered account. This is where I help clients shift toward strategies that make the income as tax efficient as possible.” Bill Craven
How Income is Taxed in Non-Registered Accounts
Income Type | Tax Treatment (Non-Registered) | Why It Matters |
Interest | Fully taxable at your marginal rate | Least efficient – avoid interest-heavy investments where possible. |
Eligible Dividends | Gross-up & dividend tax credit | Often taxed at a lower effective rate than interest. |
Capital Gains | 50% of gain included in taxable income (current CRA rules through 2025) | More efficient than interest; only half is taxable. |
Source: CRA, CPA Canada, Ontario government.
Important note: This table is for general educational purposes only. It is not tax advice. Bill Craven is a Certified Financial Planner® who focuses on helping clients structure inheritances and investments with clarity. For personalized tax advice, always consult a licensed accountant or tax professional.
This difference is why non-registered investing is so often built around capital gains and dividends rather than interest income.
Tools for Tax Efficiency
- Corporate Class Funds: Mutual funds designed to reduce taxable distributions and favour capital gains over interest.
- T-SWIP (Series T Systematic Withdrawal Plans): Provide structured, tax-efficient cash flow where much of the withdrawal may be classified as return of capital (ROC) before being taxed later.
- Asset Location: Placing interest-producing investments inside registered accounts, while leaving dividend- and growth-focused investments in non-registered accounts.
These tools don’t eliminate tax, but they can shape how much you keep after tax.
Estate Planning Considerations
- Non-registered accounts have no direct beneficiaries → assets pass through the estate.
- This can mean probate fees and administrative delays.
- Coordinating wills, trusts, and ownership structures becomes more important here.
“Non-registered investing is often the most interesting and rewarding frontier. It’s also where mistakes can be the costliest. That’s why it’s the point when people need experienced planning more than ever.” Bill Craven
Q&A: Why is non-registered investing different?
Answer: Unlike a TFSA or RRSP, a non-registered account doesn’t shelter income from tax or let you name a beneficiary. That means how you invest — and the type of income you generate — matters much more. The goal is usually to bias returns toward capital gains and dividends rather than interest, while also coordinating with your estate plan.
Checklist: Questions to Ask Before Opening a Non-Registered Account
- How will my investment income be taxed?
- Ask how the planner will balance interest, dividends, and capital gains.
- What strategies will you use to make my portfolio tax-efficient?
- Look for tools like corporate class funds, T-SWIP cash-flow structures, and proper asset location.
- How will my non-registered investments fit with my TFSA and RRSP?
- Your accounts should work together, not in isolation.
- What happens to my non-registered account when I pass away?
- Since no beneficiary can be named, ask how your estate plan will handle probate and taxes.
- Why should I work with you instead of a bank or robo-advisor?
- Experience, personalization, and coordinated planning are critical at this stage.
“Inheritance is often the first time people open a non-registered account. That’s where questions like these become the difference between simply investing — and investing wisely.” Bill Craven
Step Five – Protect What You’ve Received
Once the first decisions about debt and investing are made, the next step is ensuring your inheritance is protected. Protecting isn’t just about avoiding loss — it’s about creating structures that give your money staying power for you and your family.- Build an Emergency Fund Setting aside a portion of your inheritance in a high-interest savings account can give you a cushion for unexpected expenses. Many Canadians aim for 3–6 months of living costs. This prevents the need to dip into long-term investments when life throws a curveball.
- Review Your Insurance Coverage An inheritance can be used to strengthen your insurance foundation. Adding or increasing life or disability insurance can help safeguard your family’s financial security. This way, your inheritance supplements protection rather than replacing it.
- Invest in Education (RESPs) For children or grandchildren, a portion of inheritance money directed into a Registered Education Savings Plan (RESP) can grow tax-free and attract government grants. Over time, it can turn part of your inheritance into a gift of education.
- Consider Trusts or Other Safeguards In some cases, trusts or joint ownership structures can help manage how inheritance funds are used and transferred. These tools require legal advice, but they can reduce probate, provide oversight for younger or vulnerable beneficiaries, and protect assets for the next generation.
“Receiving an inheritance is only half the story — protecting it is what determines its impact. By giving money a structure, you make sure it continues to serve you and your family, rather than slipping away through unexpected costs or poor planning.” Bill Craven
Q&A: How do I protect inheritance money in Canada?
Answer: Protection usually starts with an emergency fund, then extends to reviewing insurance, setting up RESPs for children, and — where appropriate — using trusts or ownership structures. The right mix depends on your family and long-term goals.
Protection Checklist
- Emergency Fund: 3–6 months of expenses in a high-interest savings account.
- Insurance Review: Life, disability, or critical illness coverage aligned with your needs.
- Education Savings: Contribute to RESPs for children or grandchildren to capture government grants.
- Safeguards: Explore trusts or ownership structures to protect assets and manage estate flow.
“Protecting an inheritance means giving it structure. These steps help ensure the money supports your goals today and continues to serve your family tomorrow.” Bill Craven
Step Six – Build a Long-Term Strategy & Coordination
An inheritance isn’t just a deposit. It’s a chance to step back and align all the pieces of your financial life so they work together. Without coordination, it’s easy for investments, accounts, and estate plans to become scattered — creating unnecessary tax, duplication, or confusion for heirs later.
A. Align Registered and Non-Registered Accounts
- TFSA: Growth and withdrawals are tax-free — ideal for flexibility.
- RRSP: Reduces taxable income now, defers tax until retirement.
- Non-Registered: The frontier for advanced, tax-efficient investing.
When coordinated, each account plays a specific role, turning your inheritance into part of a well-rounded strategy.
B. Plan for Estate Equalization
An inheritance you receive today may one day become part of the wealth you pass forward. Coordinating how assets are titled and divided can ensure fairness among heirs while reducing conflict and costs.
C. Think About Wealth Transfer
Trusts, beneficiary designations on registered accounts, and clear wills ensure assets move smoothly to the next generation. Non-registered assets, because they pass through the estate, often require more careful planning.
D. Regular Reviews and Adjustments
Life doesn’t stand still. Career changes, family needs, or tax updates can all affect your plan. Annual reviews with a planner help keep everything on track.
“Inheritance planning isn’t just about where to put money today. It’s about creating a plan that grows with you — one that balances your immediate needs with the legacy you want to leave behind.” Bill Craven
Q&A: Why do I need a long-term plan for my inheritance?
Answer: Because the choices you make now affect not only your retirement but also how your estate will one day be handled. Coordinating TFSA, RRSP, and non-registered investments ensures your inheritance grows tax-efficiently and transfers smoothly to the next generation.
Why Work with an Experienced Planner
For many people, receiving an inheritance is the moment they realize they need a different kind of financial guidance. It’s common to:
- Move from DIY investing → recognizing that advanced accounts like non-registered plans require deeper expertise.
- Switch from bank-branch advice → realizing that basic product sales or junior advisors may not be enough.
- Seek a more experienced partner → someone who can see the full picture and integrate tax efficiency, estate considerations, and long-term planning.
In Ontario, the title “Financial Planner” is regulated, which means not everyone can use it. Bill Craven is a Certified Financial Planner® with more than 34 years of experience helping Canadians navigate life events like inheritance with clarity and confidence.
“An inheritance is often when people graduate to a new level of planning. It’s the point when experience and careful coordination matter most.” Bill Craven
Working with an experienced planner doesn’t just mean choosing investments. It means:
- Having a guide who integrates TFSA, RRSP, and non-registered accounts.
- Avoiding costly mistakes that come from ignoring estate and tax realities.
- Ensuring that your inheritance supports both your immediate needs and your long-term legacy.
Q&A: Why should I work with a planner after receiving an inheritance?
Answer: Because inheritance decisions are rarely simple. They involve taxes, estate rules, and advanced accounts like non-registered investments. An experienced, regulated planner can help structure your money, so it works harder for you — and for the generations that follow.
Key Takeaways
- An inheritance is an important milestone, not just a windfall. It deserves careful planning rather than quick decisions.
- Secure the foundation first. Pay off high-interest debt, maximize your TFSA, and contribute to your RRSP if room exists.
- Graduate to non-registered investing. This is often the first time Canadians face advanced, tax-sensitive strategies.
- Tax efficiency and estate planning are crucial. How you generate income (capital gains, dividends, or interest) and how you coordinate your estate plan can make a lasting difference.
- Seek experienced advice. This is the stage where moving from DIY or bank-branch advice to a seasoned, regulated planner can protect your inheritance and unlock its full potential.
“Inheritance planning isn’t about quick wins — it’s about building stability and making sure the legacy you’ve received continues to grow.”
Take the Next Step
If you’ve received an inheritance, the most important move you can make is to put structure around it. A thoughtful plan ensures your inheritance doesn’t just sit in an account — it grows, protects your future, and becomes part of the legacy you’ll one day leave.
Download Your Free Guide
Craven Disability Insurance Checklist (PDF)
This resource will help you understand one of the most overlooked aspects of financial security: protecting your income.
Book Your Inheritance Strategy Session
Work directly with Bill Craven, CFP®, EPC — a regulated, experienced financial planner with over 34 years of guiding Ontarians through life’s biggest financial milestones. Together, you’ll:
- Review what you’ve inherited.
- Explore tax-efficient strategies for TFSA, RRSP, and non-registered accounts.
- Protect your inheritance with the right safeguards.
- Build a coordinated long-term plan that grows with you.
Contact Bill Today — and turn your inheritance into a foundation for clarity, security, and lasting wealth.
An inheritance is more than money. It’s a responsibility, a reflection of someone’s hard work, and an opportunity to shape your own financial future. The key is not speed, but structure — and the right guidance.
“It’s about honouring what you’ve received by making it last.” Bill Craven
Frequently Asked Questions
Q: Do you pay tax on inheritance in Ontario?
Q: What happens when my TFSA and RRSP are maxed?
Q: How are non-registered accounts taxed?
Q: Can non-registered accounts have beneficiaries?
Q: Why is inheritance a good time to work with a financial planner?
Further Reading & Resources
1. Canada Revenue Agency (CRA): What to Do Following a Death
The CRA outlines the tax steps that apply after someone passes away, including final returns, RRSP/RRIF treatment, and deemed disposition rules.
https://publications.gc.ca/collections/collection_2017/arc-cra/Rv4-51-2016-eng.pdf
“CRA guidance shows how taxes apply before inheritance money even reaches you. It’s why I remind clients that what you receive has already been shaped by tax rules.” Bill Craven
2. Government of Ontario: Estate Administration Tax (Probate Fees)
Explains Ontario’s probate fee system: no fee on the first $50,000 of estate value, and about 1.5% on amounts above.
https://www.ontario.ca/page/estate-administration-tax
“Probate is often overlooked, but it reduces what’s left in the estate. Planning ahead can minimize these costs and delays for your heirs.” Bill Craven
3. CPA Canada: Inheritance and Tax Guidance
A professional overview of how inheritance interacts with tax in Canada, including estate tax rules, deemed disposition, and planning considerations.
https://www.cpacanada.ca/news/accounting/tax/inheritance
“CPA Canada highlights the technical side of inheritance. My role is to translate this complexity into a clear plan clients can act on.” Bill Craven
4. MoneySense: Inheritance Planning in Canada
A consumer-friendly guide to what Canadians should consider when they receive an inheritance, including debt repayment and investment options.
https://www.moneysense.ca/save/debt/what-should-i-do-with-an-inheritance/
“MoneySense does a good job making inheritance planning accessible. The next step is tailoring these ideas to your specific situation.” Bill Craven
5. Wealth Professional Canada: Most Canadians Aren’t Ready for the Tax Side of Inheritance
Highlights how many Canadians underestimate the tax impact of inheritance and lack preparation for estate complexities.
“This article confirms what I see every day: most people are unprepared for the tax side of inheritance. That’s where experience makes the difference.” Bill Craven
Mutual funds, approved exempt market products and/or exchange traded funds are offered through Investia Financial Services Inc.
The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances.
This article was prepared by Bill Craven, who is an Investment Funds Advisor at Craven Financial Planning, a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc.
The information contained in this presentation comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability.
Farm Succession in Ontario
Farm Succession in Ontario: A Practical Guide for Family Farms (with Insurance Strategies) By Bill Craven B.A.,CFP,EPC Farm Succession in Ontario: A Practical Guide for Family Farms Most family farms are land-rich and cash-poor. Value sits in acres, equipment, and quota, so a tax bill, debt call, or buyout at
What to Do with an Inheritance in Ontario
What to Do with an Inheritance in Ontario: Making the Most of a New Opportunity By Bill Craven B.A.,CFP,EPC “Inheritance planning isn’t just about receiving money — it’s about understanding the rules that shape it and using the right guidance to turn it into long-term security.” — Bill Craven, CFP®, EPC
