Question from a Reader:
"My wife has landed immigrant status in Canada, and has lived here for over 20 years. Her father has recently past and has left her aprox $30,000 Cdn. What are the laws in Canada towards this Money. Is it declared as income? Is there an inheritance tax that she will have to pay once she receives the money? Everything I read says Canada does not have an inheritance tax but I'm sure our Government will take a chunk some how."
A Canadian taxpayer receiving an inheritance from inside or outside the country does NOT include that money in their income. It is tax-free. Our tax collector the CRA says so here.
There is no inheritance tax in Canada, thankfully. The closest thing is the rule that a deceased person is deemed to have sold everything on the day before their death, which can trigger capital gains to pay, or a very large income all at once, for instance when RRSPs are considered to have been terminated and all of the proceeds are taken into income. The person who pays such taxes is the dead person, or more accurately, the estate of the deceased. By the time the cheque arrives to the inheritor, all those taxes must have been paid out of the estate, otherwise the executor is liable (not the recipient). Executors make sure they are not exposed by getting a written clearance certificate from the CRA stating that all taxes have been paid.
The only taxes your wife would pay is on any gains or income from investing that money afterwards.
Inheritances that a Canadian receives from abroad are also not taxed as income by the recipient. The foreign country with an estate or inheritance tax, like the USA or the UK, will have levied its taxes before the money can be distributed.
In general, even in countries which have an inheritance tax, by the time the money is delivered to the recipient, any inheritance owing should/will have been paid. It's the estate that pays.
My condolences on her losing her father.