RRSPs, Real Estate, And Private Company Shares: The Three Estate Tax Traps
April 23, 2026
BY: IAN ANDREW LAW
Many clients think about their estate in asset categories: the RRSPs, the house, and the business. That is sensible from a balance-sheet perspective. It can be dangerous from a death-tax perspective.
Those three asset classes often create three very different problems at death, and they rarely resolve on the same timetable. A will can direct who should benefit. It does not neutralize the underlying property's tax character.
Key Takeaways
• Different assets create different tax pressures at death.
• RRSPs and RRIFs can create large income inclusion issues.
• Real estate can crystallize deferred capital gains.
• Private company shares can create complex post-mortem tax planning issues.
• Good estate planning starts with asset character, not just asset value.
RRSPs And RRIFs: The Immediate Income Problem
Where no rollover is available, registered plans can produce a large income inclusion in the terminal return. Clients often focus on the account value as if it were fully transferable wealth. In reality, the after-tax value may be far lower, particularly where the estate already has other sources of terminal income.
That is why large registered plans often require separate planning conversations long before the will is signed.
Real Estate: The Gain May Be Quieter, Not Smaller
Real estate raises a different issue. The tax may depend on principal residence treatment, adjusted cost base, use of the property, and whether the asset is personally held or linked to a broader family structure. A cottage and an income property do not behave the same way. Even a family home may not solve the entire problem if another property also carries a significant accrued gain.
The planning error is assuming that bricks and mortar are tax-neutral because they are familiar.
Private Company Shares: Value Without Cash
Private company shares can be the hardest category of all. The estate may be dealing with valuation issues, post-mortem planning options, corporate records, shareholder dynamics, and a tax problem that is conceptually clear but operationally difficult. A business interest can be the estate’s largest asset and its worst source of liquidity pressure at the same time.
These are not reasons to avoid wealth-building assets. They are reasons to plan for how different assets behave at death. In estates work, tax exposure usually follows character, structure, and timing - not just the number at the top of the statement.
Sources
• Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), including ss. 54, 70, 83, 88, 89, 146, 146.3 and 164.
• Estates Administration Tax Act, 1998, S.O. 1998, c. 34, Sched.
This article is for general information purposes only and does not constitute legal advice. Reading this article does not create a solicitor-client relationship. If you require advice specific to your situation, contact my office.