Book an appointment

How Canada’s Aging Population Is Reshaping Inheritance Laws

Is Your Power of Attorney Still Valid Provinces Are Updating the Rules

Table of Contents

A sprawling family cottage nestled along the shores of Lake Ontario, its weathered dock creaking under the weight of decades of memories. For generations, it’s been the heart of family gatherings, but now, as the patriarch or matriarch approaches their twilight years, a question looms: who gets the cottage, and at what cost?

This scene is taking place across innumerable homes in Canada, where the population is rapidly aging, creating the need to reckon with an existing womb-mate, based on the statement of the anxiety of creators of the inheritance laws because inheritance laws are suddenly evolving, as they seek to negotiate the needs of the changing demographic landscape.

These changes have been transforming the estate planning side of things, and at Forum Estates LLP, we have become witnesses to how these developments are shaking up the landscape of estate planning, and we are ready and willing to help you figure everything out in a clear and insightful way. 

The Silver Tsunami: Canada’s Aging Population

Canada is aging rapidly. In 2010, just about 14.1% of Canadians were aged 65 and older. Statistics Canada projects that by 2030, this segment will grow to approximately 22.5%, meaning nearly one in every five Canadians will be a senior.

The silver tsunami is a trade term for an age wave of aging populations around the world, but it is more than a demographic change; it is also a promulgator of legal and financial reform.  

With the baby boomers taking their place in retirement homes and leaving huge piles of wealth, some of which is estimated to reach the ultimate level of trillions of dollars of assets over some 10 or so years, the issue of inheritance law is even now being reviewed and overhauled to tackle the new reality of an aging society. 

The changing population trend is straining the estate planning aspect as families struggle to transfer wealth, property and legacies.  

Canada Revenue Agency (CRA) and provincial governments are reacting, but there has been some controversy.  

The recent modifications of the capital gains taxation policies, trust rules and estate management policies demonstrate the necessity to attain the balance between fairness and financial responsibility.  

So, there we go into the details of how these changes are playing out and what it means to you. 

Capital Gains Tax: A Game-Changer for Estates

One of the most significant updates to inheritance laws in recent years is the adjustment to capital gains tax, which directly impacts estates and trusts.

In April 2024, the Canadian federal government announced an increase in the capital gains inclusion rate from 50% to 66.67% for gains exceeding $250,000, set to take effect on June 25, 2024.

However, in a surprising twist, this increase was postponed on January 31, 2025, and is now slated for implementation on January 1, 2026.  

This means that for the 2024 and 2025 tax years, the inclusion rate remains at 50% for all capital gains, providing temporary relief for estates and individuals planning their legacies. 

What does this mean for inheritance?

When someone passes away, the CRA deems all their capital assets, such as cottages, investments, or small business shares, sold at fair market value immediately before death, triggering capital gains tax.  

For example, if a family cottage purchased for $200,000 is worth $1.2 million at the time of death, the estate faces a taxable capital gain of $1 million. At the current 50% inclusion rate, $500,000 is taxed at the deceased’s marginal rate.  

If the new 66.67% rate had been implemented, $666,667 would have been taxable, significantly increasing the tax burden.  

This delay offers a window for strategic planning, but as Prashant Patel, vice president at RBC Wealth Management, notes, “You really need some advice around how to do these tax filings, I think.” Strategic planning with firms like Forum Estates LLP can help mitigate these costs. 

The Lifetime Capital Gains Exemption (LCGE) also saw a boost, rising from $1,016,836 to $1.25 million effective June 25, 2024, for qualified small business shares, farming, or fishing properties. 

The exemption provides tax relief on the part of capital gains that have been transferred through families in the sale of businesses or rural properties.  

Besides, the Canadian Entrepreneurs Incentive, in 2025, will decrease the inclusion rate of qualified business benefits to a third of all business profits up to a lifetime cap of $2 million, motivating entrepreneurship during the wealth transfer among older generations. 

Trusts: The Backbone of Modern Estate Planning

The use of trust is becoming one of the pillars of the estate planning process in Canada since citizens are trying to navigate through their taxes and have an efficient transfer of their wealth. The old population has increased the application of alter-ego trusts and joint-spousal trusts, especially among older citizens above 65.  

In such trusts, assets can be transferred before death, avoiding the payment of probate fees as well as possible capital gains taxes.  

According to Investopedia, forming a trust allows you to pass your assets while still alive, thereby avoiding probate costs upon your death.  

That is even more important in provinces such as Ontario, where probate fees may amount to 1.5 percent of the value of an estate. Trusts have complexities, though. The 21-year deemed disposition scheme compels trust to calculate capital gains every 21 years, which may cause a levy of unrealized gains.  

To the older Canadians, who are just establishing trusts, this rule may fall at their old age, making estate planning a challenge.  

In Forum Estates LLP, we recommend our clients to organize trusts in a wise manner using the exemptions and professional expertise to reduce tax effects. 

The rules governed by the CRA, which are presented in the Income Tax Act, have an emphasis on compliance; one is forced to take care of the documents and keep them neat to escape punishment. 

Inheritance Laws and the Principal Residence Exemption

Canada does not charge any inheritance tax as it is done in other nations. Rather, taxes on deemed dispositions are paid on the estate prior to distribution of assets to afterlife recipients.  

This implies that heirs generally benefit at no tax cost, but the amount which the estate has to pay as tax can be high. The Principal Residence Exemption has been a lifesaver, and it guarantees that a capital gain made on the largest home is not subject to taxation.  

To aging Canadians, the ability to appoint a principal residence, a city home or a cottage, in this case, has the potential of allowing taxes to be minimized. But, as the CRA explains, such an exemption is up to the death date, at which point the beneficiaries are subject to taxation if they were to sell the property. 

For spouses or common-law partners, tax-deferred rollovers are a game-changer. Assets transferred to a surviving spouse or a testamentary spousal trust within 36 months of death avoid immediate capital gains tax, as outlined in the Income Tax Act.  

This provision is particularly relevant as more Canadians live longer, increasing the likelihood of spousal inheritances. “The inheritance you receive is not taxable as it has already been taxed,” explains TurboTax Canada, highlighting the importance of proper estate settlement to avoid surprises. 

The Aging Population’s Broader Impact

The aging population is not just reshaping tax laws; it’s redefining family dynamics and legal frameworks. With life expectancy rising, Canadian women now live to 84 on average, men to 80, and more families are dealing with prolonged periods of incapacity before death.

This has spurred updates to the Children’s Law Reform Act in Ontario, allowing wills to appoint guardians for minor children and separate individuals to manage inherited property, ensuring clarity in complex family structures. 

In addition, the great wealth transfer is being made, where baby boomers are transferring unmatched wealth. In a page of the H&R Block Canada survey that was conducted in 2025, 33% of Canadian individuals were aware of the tax implications of transferring assets before versus after death.  

This lack of awareness underscores the need for proactive planning. As families navigate multi-generational wealth transfers, cross-border issues also arise. 

Canadians inheriting foreign assets, like U.S. properties, face additional complexities, such as U.S. estate taxes, which can reach 40% on assets exceeding $13.99 million in 2025, per Scotia Wealth Management. 

A Call to Action: Plan Now, Thrive Later

The situation of both an aging population and changing laws of inheritance requires some vision. At Forum Estates LLP, we hold the view that proactive estate planning should look beyond tax savings; rather, estate planning should be done to build a legacy that would last into the future.

Whether it’s leveraging the LCGE, setting up a trust, or ensuring a tax-deferred spousal rollover, the decisions you make today can ripple through your family’s future. 

“Without proper planning, cottages and other vacation homes can become the basis for family disputes, turning what should bring the family together into what tears the family apart.”  

(O’Sullivan Estate Lawyers February 2025 Advisory)

This feeling rivals because Canadians experience inflation of property value as well as complex tax regulations. The Income Tax Act, combined with provincial ones, such as the Ontario Estate Administration Tax Act, outlines the necessity of professional advice. 

Don’t let the complexities of Canada’s changing inheritance laws catch you off guard. Visit ForumEstates.ca to connect with our team and start planning today. As the population ages, the stakes are higher, but so are the opportunities to secure your legacy with confidence. 

References:

  • Statistics Canada. (2020). Population Projections for Canada (2018 to 2068).
  • O’Sullivan, M. (2018). Estate Planning for the Family Cottage. LexisNexis Canada.
  • Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.).
  • Children’s Law Reform Act, R.S.O. 1990, c. C.12.
  • Canada Revenue Agency. (2025). Taxable Capital Gains on Property, Investments, and Belongings.
  • TurboTax Canada. (2025). Canada Inheritance Tax Laws & Information.
  • H&R Block Canada. (2025). No Inheritance Tax for Canadians.
  • Scotia Wealth Management. (2025). U.S. Estate Tax Planning Considerations.
  • Wealthsimple. (2025). Capital Gains Tax in Canada in 2025.
  • RBC Wealth Management. (2024). Will the Changes to the Capital Gains Inclusion Rate Impact Me?