Selling an inherited house in Ontario involves legal steps that don't apply to an ordinary residential sale. Before you can list a property that was inherited, you need to confirm who has the legal authority to sell it, whether probate (now called a Certificate of Appointment of Estate Trustee) is required, and what the capital gains tax implications are. Getting these foundational questions right before listing prevents serious problems during the transaction — including deals that fall apart at closing because title can't be transferred.
This guide covers the general process for selling inherited property in Ontario. Estate law and tax implications are complex and fact-specific. The estate should be administered by a qualified estate lawyer, and both the estate and any beneficiaries should get independent legal and tax advice before selling.
Who Has the Authority to Sell an Inherited House?
The answer depends on how the deceased held title and whether a will exists.
If there is a will: The person named as estate trustee (also called executor) has authority to administer the estate, including selling real property, subject to the terms of the will and applicable law. However, even with a will, a buyer's title insurer and lender will typically require a Certificate of Appointment of Estate Trustee with a Will (commonly called probate) before they'll accept the transfer of title. This is because probate confirms the court's recognition of the will's validity and the estate trustee's authority.
If there is no will (intestate): No one has automatic authority to administer the estate. Someone must apply to the court to be appointed as estate trustee (without a will). The court grants a Certificate of Appointment of Estate Trustee Without a Will. The resulting administrator then has authority to sell. This takes longer and involves additional steps compared to a situation with a valid will.
Joint tenancy exception: If the deceased held the property as a joint tenant (not tenants in common) with a surviving co-owner, the deceased's interest passes automatically to the surviving joint tenant by right of survivorship. Probate is typically not required for this transfer — the survivor files a survivorship application with the land registry using a death certificate. This is a different scenario than inheritance under a will.
Does Probate Take a Long Time?
Yes. Probate in Ontario typically takes 3–12 months from application, depending on the complexity of the estate, the court's workload, and whether the application is straightforward. The Ontario Superior Court of Justice processes estate applications, and timelines vary by court location. Toronto estates often take 6–9 months or more. If the estate has contested claims — beneficiaries who dispute the will — it can take years.
You generally cannot list or accept an offer on the inherited property until probate is complete or until a lawyer can confirm title can transfer without it (rare in most residential sales). Planning the timeline around the probate process is essential — don't commit to a closing date before probate is in hand.
Estate Administration Tax (Probate Fees)
Ontario's Estate Administration Tax applies to the value of the estate that goes through probate. The current rate is approximately $15 per $1,000 of estate value over $50,000. On an estate with a $1,000,000 home (and no other significant assets), the tax is approximately $14,250. This is paid when the probate application is filed, from estate funds. The estate administration tax is not the same as income tax — capital gains on the property are a separate calculation.
Capital Gains Tax on an Inherited Property
When a person dies in Canada, the Income Tax Act treats their assets as if they were disposed of at their fair market value at the moment of death. For inherited real property, this is called the "deemed disposition." The estate (or the deceased's final tax return) recognizes a capital gain (or loss) equal to the difference between the property's fair market value at the date of death and the adjusted cost base (usually the original purchase price plus improvement costs).
The person who inherits the property receives it at a cost base equal to that date-of-death fair market value. When they subsequently sell it, capital gains are calculated from that new cost base — not from what the original owner paid decades ago. This is important: if the property has appreciated significantly since the date of death, there will be additional capital gains when you sell.
Example: A parent purchased a home for $300,000 and it was worth $1,200,000 when they died. The estate recognizes a $900,000 capital gain on the deemed disposition (partially or fully offset by the principal residence exemption if it applied). You inherit the property at a cost base of $1,200,000. If you sell immediately, there are no additional capital gains. If you hold it for 2 years and sell for $1,350,000, there's a $150,000 capital gain taxed in your hands.
Principal residence exemption: If the deceased used the property as their principal residence throughout their ownership, the exemption eliminates the capital gain on the deemed disposition. If they rented out part or all of the property, or if they owned other properties, the exemption may only partially apply. This determination requires a tax professional.
The Practical Selling Process
Once probate is obtained and the estate lawyer confirms the estate trustee has authority to sell:
- The estate trustee engages a real estate agent (the estate pays the commission from proceeds)
- The property is appraised for listing and for confirming the date-of-death value (if not already done)
- The estate lawyer reviews and signs the listing agreement on behalf of the estate
- Offers are reviewed by the estate trustee with the estate lawyer's guidance
- The estate trustee signs the APS on behalf of the estate
- Closing proceeds with the estate lawyer handling title transfer from the estate to the buyer
- Proceeds flow to the estate and are distributed to beneficiaries after debts, taxes, and administration costs are paid
Maintaining the Property During the Estate Process
One practical issue that catches estate trustees off guard: inherited property must be insured during the estate administration. Standard homeowner's insurance typically lapses or changes coverage when the named insured dies. Contact the insurer immediately after death and notify them — many insurers offer estate coverage for vacant or temporarily unoccupied properties, though at higher premiums. A fire or flood during an uninsured estate period can result in catastrophic loss to beneficiaries with no insurance recovery.
FAQ
Can beneficiaries sell the inherited house if they all agree?
Beneficiaries cannot sell real property directly — the estate trustee holds title authority during administration. Even if all beneficiaries agree, the estate trustee is the party who can legally execute the sale on behalf of the estate. If beneficiaries want to sell before the full estate administration is complete, the estate trustee must manage the transaction with the estate lawyer's guidance.
What if there are multiple beneficiaries and one doesn't want to sell?
If the will directs the estate trustee to sell the property and distribute proceeds, the beneficiary's preference to keep it is generally not determinative — the estate trustee follows the will's directions (subject to court supervision). If the will gives the beneficiaries discretion over whether to sell, disagreement between beneficiaries can require court application for direction. Estate disputes are expensive and slow — a negotiated resolution through mediation is almost always preferable.
Do I owe capital gains tax if I sell an inherited house immediately?
If you sell immediately at the date-of-death fair market value (the cost base you received), there's no capital gain in your hands — the gain was recognized on the deceased's final return (and may have been sheltered by the principal residence exemption). If you hold the property and it appreciates before you sell, you'll have a capital gain on the appreciation above the date-of-death value. A tax accountant can calculate both scenarios.
How long does the entire process take from death to sale closing?
In a straightforward Ontario estate — clear will, uncontested, prompt probate application — from date of death to sale closing realistically takes 9–18 months. Probate takes 3–12 months alone. Add 2–4 months to list, accept an offer, and close. Complex estates with contested wills, multiple properties, or tax disputes take longer.
Can the estate accept conditions in the offer to purchase?
Yes. Estate sales can include the full range of buyer conditions (financing, home inspection, status certificate). The estate trustee evaluates and accepts offers the same way any seller would. Some estate sales are listed "as is" because the estate trustee may not have detailed knowledge of the property's condition — but "as is" does not eliminate disclosure of known material latent defects, even in an estate context.