Canada has no inheritance tax — once the estate settles its own taxes (deemed disposition on investments, full inclusion of RRSP/RRIF balances), the money you receive is tax-free. That doesn’t mean there’s nothing to think about: future investment earnings on the inherited amount are fully taxable, so where you park the money matters enormously. The single best piece of advice is to do nothing for three to six months. Park the entire sum in a high-interest savings account earning 4%+ while you grieve, plan, and consult a fee-only financial planner ($1,500–$3,500 for a one-time plan).
Once you’re ready, follow a clear priority order: top up your emergency fund (3–6 months of expenses), eliminate all high-interest debt (paying off a 20% credit card is a guaranteed 20% return), then maximize tax-advantaged accounts — TFSA first for flexibility, RRSP if you’re in a high bracket, FHSA if you’re saving for a first home, and RESP if you have children. Only after those shelters are full should you invest in a non-registered account using low-cost index ETFs.
First Steps
The 6-Month Rule
Advice
Don’t rush
Grief impairs decisions
Park money safely
High-interest savings account
Wait
3-6 months before major decisions
Plan
Create a deliberate strategy
Immediate Actions
Step
Action
1
Confirm amount received
2
Understand any conditions
3
Move to HISA temporarily
4
Get professional advice
5
Create a plan
Understanding What You Received
Common Inheritance Forms
Type
Considerations
Cash
Ready to use/invest
Registered accounts
RRSP/RRIF—may be taxable
Real estate
Sell, keep, or rent?
Investments (non-registered)
Inherited at FMV
Life insurance
Tax-free
Business interests
Complex—get advice
Tax Implications
Asset
Tax Treatment
Cash
Tax-free to you
RRSP/RRIF (non-spouse)
Taxed in estate already
RRSP/RRIF (spouse)
Rolled over tax-deferred
Non-registered investments
Your ACB = FMV at death
Real estate
Your ACB = FMV at death
Life insurance
Tax-free
Creating Your Plan
The Framework
Priority
Focus
1
Emergency fund
2
High-interest debt
3
Tax-advantaged accounts
4
Other goals
Questions to Ask
Question
What are my goals?
Short, medium, long-term
What debt do I have?
Interest rates
What’s my income?
Affects strategy
What’s my age?
Time horizon
What would they want?
Honour their memory
Priority 1: Emergency Fund
If You Don’t Have One
Action
Set aside
3-6 months expenses
Where
High-interest savings account
Why first
Foundation of financial security
Example
Monthly expenses
$4,000
Emergency fund
$12,000-$24,000
Put in
HISA earning 4%+
Priority 2: Pay Off High-Interest Debt
Debt Payoff Priority
Debt Type
Interest Rate
Priority
Payday loans
300%+
Immediate
Credit cards
19-29%
High
Personal loans
8-15%
High
Car loans
5-10%
Medium
Student loans
5-8%
Medium
Mortgage
4-7%
Consider
HELOC
6-8%
Consider
The Math
Scenario
Credit card debt
$15,000 at 20%
Annual interest
$3,000
Paying off =
Guaranteed 20% return
vs Investing
Uncertain 7-8% return
Mortgage Decision
Factor
Consideration
Mortgage rate
5% or less?
Risk tolerance
Prefer guaranteed?
Investment return
Expected 6-8%?
Peace of mind
Value being debt-free?
Priority 3: Tax-Advantaged Accounts
Maximize These First
Account
2024 Limit
Priority
TFSA
$7,000 + unused
High
RRSP
18% of income
If higher bracket
FHSA
$8,000
If buying home
RESP
$2,500/year
If have children
TFSA First (Usually)
Why
Flexibility
Withdraw anytime
Tax-free growth
All gains
No income requirement
Room accumulates
May have lots
RRSP Considerations
Best if
High income
Marginal rate 40%+
Will be lower
In retirement
Lots of room
Catch up
Example Allocation
Inheritance
$200,000
Emergency fund top-up
$15,000
Credit card debt
$10,000
TFSA (max)
$60,000
RRSP (max room)
$50,000
FHSA (max)
$16,000
Remaining
$49,000
Investing the Remainder
Investment Options
Option
Best For
Index funds/ETFs
Long-term, simple
GICs
Short-term, safe
Balanced funds
Moderate approach
Robo-advisors
Hands-off investors
Financial advisor
Large amounts, complexity
Asset Allocation by Age
Age
Stocks
Bonds/Fixed
20s-30s
80-90%
10-20%
40s
70-80%
20-30%
50s
60-70%
30-40%
60s+
50-60%
40-50%
Where to Invest
Platform
Best For
Wealthsimple
Beginner, small amounts
Questrade
DIY, low fees
Robo-advisors
Hands-off
Big bank advisor
Full service (higher fees)
Fee-only planner
One-time advice
Special Situations
Inherited RRSP/RRIF (Non-Spouse)
What Happens
Estate paid tax
Full amount taxed
You receive
After-tax amount
Your treatment
Like receiving cash
Invest
In your own accounts
Inherited RRSP (Spouse)
What Happens
Rollover option
To your RRSP/RRIF
No immediate tax
Deferred until you withdraw
Good option
Keeps tax-deferred growth
Inherited Property
Options
Sell
Get cash, invest elsewhere
Keep + rent
Rental income stream
Live in
Personal residence
Consider
Maintenance, location, market
Your ACB on Inherited Property
Starting Point
FMV at death
Future gain
From FMV, not original cost
Capital gains
Only on increase from FMV
How Much to Spend
The 4% Rule (for Large Amounts)
Guideline
Withdraw
4% per year
Likely lasts
30+ years
Inflation
Adjust annually
Example
Inheritance
$500,000
4% withdrawal
$20,000/year
Monthly
$1,667
Principal
Likely preserved
Gifting to Family
Consideration
Gift tax
None in Canada
Attribution rules
May apply if minor children
Estate planning
Include in your plan
Honour Their Memory
Meaningful Uses
Idea
Invest in yourself
Education, career
Help family
Shared goal
Charitable giving
Cause they cared about
Memorial
Scholarship, donation
Future security
What they’d want
Common Mistakes
What to Avoid
Mistake
Why Bad
Spending it all quickly
Lifestyle inflation
Risky investments
Can lose everything
Lending to family
Often not repaid
Major purchases immediately
May regret
Ignoring advice
Missing opportunities
Feeling guilty
It’s okay to benefit
Getting Professional Help
When to Get Advice
Amount
Recommendation
Under $50K
Self-direct, simple plan
$50K-$250K
Fee-only planner (one-time)
$250K+
Comprehensive advice
Fee-Only Planner
Benefit
No conflict
Paid hourly, not commission
One-time
Create plan, then DIY
Cost
$1,500-$3,500 typically
The Bottom Line
Wait 3–6 months before making any major decisions, park the money in a HISA in the meantime, and follow a strict priority: emergency fund, high-interest debt, TFSA, RRSP, FHSA/RESP, then taxable investing. Consult a fee-only (not commission-based) financial planner for inheritances over $50,000. The best way to honour what someone left you is to protect it from impulse decisions and put it to work in a way that compounds for decades.