What to Do When You Receive an Inheritance

Receiving an inheritance can be both emotionally overwhelming and financially significant. Whether it’s a large sum of money, property, investments, or a family cottage, it’s important to pause before making any big decisions. In Canada, managing an inheritance requires careful planning—not just for tax purposes, but also to make sure the assets support your long-term financial goals.

A financial planner can help you assess your options, minimize risks, and put your inheritance to good use.

Take Time Before Making Major Decisions

It’s natural to feel the urge to act quickly—pay off debt, buy a home, or invest. But inheritance often comes with emotional weight, especially after the loss of a loved one. Most experts recommend waiting a few months before making significant financial moves.

During this time, a financial planner can:

• Help you understand what you’ve inherited (cash, property, investments, etc.)
• Assist in collecting necessary documents (will, tax records, financial statements)
• Connect you with legal or tax professionals, if needed

Understand the Tax Implications in Canada

In Canada, you do not pay tax on the inheritance itself—but the estate may be taxed before assets are passed on to you. For example:

• Capital gains tax may apply to property or non-registered investments
• RRSPs or RRIFs may be taxed as income in the deceased’s final return
• Any income generated by the inherited assets going forward (e.g. rental income, dividends) will be taxable to you

A financial advisor will help you understand how these rules apply to your situation and how to structure your assets efficiently going forward.

Consider Your Current Financial Situation

Before deciding what to do with the inheritance, assess your full financial picture:

• Do you have high-interest debt?
• Is your emergency fund in place?
• Are you saving enough for retirement?
• Do you have children’s education or long-term goals to plan for?

A financial planner can help prioritize which needs to address first. Sometimes, paying off all debt immediately may not be the most tax-smart option, depending on your income, interest rates, and overall goals.

Develop a Long-Term Investment Plan

For many Canadians, an inheritance is a once-in-a-lifetime opportunity to build lasting financial security. Working with a planner, you can:

• Create or update your investment strategy
• Allocate funds based on your time horizon and risk tolerance
• Use tax-advantaged accounts like TFSAs and RRSPs
• Consider trusts or other legal tools for protecting or distributing wealth

Your inheritance should work for you—not just now, but in the decades to come.

Protect the Inheritance

In some cases, you may want to shield the inheritance from future risks:

• If you’re in a common-law relationship or going through a divorce
• If the inheritance was intended to stay in the family
• If you want to preserve the value for future generations

A planner can help you explore options like setting up a trust, maintaining separate accounts, or documenting specific intentions in a will or agreement.

Honor the Intentions of the Giver

While the inheritance is now legally yours, many recipients find peace in aligning their financial choices with the values of the person who gave it to them. This could mean charitable giving, helping family members, or supporting a cause that was important to your loved one.

A financial planner can help facilitate these actions through gifting strategies, donor-advised funds, or structured charitable giving.