Key Takeaways
- 1.The $200K RRSP is fully included in the deceased's final income — with no surviving spouse, deemed disposition triggers approximately $74,000–$84,000 in combined federal/Alberta tax, leaving heirs ~$116K–$126K.
- 2.The $80K TFSA passes to beneficiaries completely tax-free — $80,000 net, no deemed disposition, no inclusion in income.
- 3.The $120K non-registered account (with $60K in unrealized gains) triggers a taxable capital gain of $30,000 at 50% inclusion — approximately $9,000–$12,000 in tax, netting heirs ~$108K–$111K.
- 4.Alberta probate fees are a flat $525 — compared to $5,250 on the same estate in Ontario.
- 5.Total estate after all taxes and fees: approximately $304K–$317K out of $400K — the RRSP is by far the most tax-eroded asset.
Canada Has No Inheritance Tax — But That Doesn't Mean No Tax
Alberta — like every Canadian province — does not levy an inheritance tax or estate tax. Canada abolished the federal estate tax in 1972. But the phrase “no inheritance tax” is misleading. What Canada has instead is a deemed disposition at death: the deceased is treated as having sold all their assets at fair market value immediately before death. This triggers income tax on the final T1 return for any asset that has accrued gains or contains tax-deferred income (like RRSPs).
The result is functionally similar to an estate tax — the estate pays the CRA before distributing to heirs. The difference is that the tax rate depends on the deceased's marginal tax bracket, not a flat estate tax rate. For an Alberta resident, the combined federal-provincial marginal rate reaches 48% on income above $355,845 (2025 rates).
The $400K Estate: Asset Breakdown
Our scenario involves a single Alberta resident who dies in 2025 with no surviving spouse or common-law partner. The estate consists of three accounts:
| Account | Fair Market Value | Adjusted Cost Base | Unrealized Gain |
|---|---|---|---|
| RRSP | $200,000 | N/A (fully tax-deferred) | $200,000 income inclusion |
| TFSA | $80,000 | N/A (tax-exempt) | $0 (tax-free) |
| Non-registered brokerage | $120,000 | $60,000 | $60,000 |
| Total estate | $400,000 | — | — |
The deceased had no other income in the year of death. All calculations use 2025 federal and Alberta tax brackets.
Each of these three asset classes receives fundamentally different tax treatment at death. Let's walk through each one. For a related breakdown of how an inherited RRSP is taxed when a named beneficiary exists, see our inherited RRSP tax calculator.
Asset 1: The $200K RRSP — Deemed Disposition in Full
When the RRSP holder dies without a qualifying spouse, common-law partner, or financially dependent child, the entire RRSP is “deregistered” and included in the deceased's income on their final T1 return under section 146(8.8) of the Income Tax Act. The $200,000 is treated as ordinary income — not as a capital gain. There is no 50% inclusion rate. Every dollar is taxable.
RRSP tax calculation (deceased's final return):
RRSP deemed income: $200,000
Other income in year of death: $0 (simplified)
Federal tax on $200,000:
$57,375 at 15% = $8,606
$57,375 at 20.5% = $11,762
$63,317 at 26% = $16,462
$21,933 at 29% = $6,361
Federal tax before credits: $43,191
Basic personal amount credit: −$2,499
Net federal tax: ~$40,692
Alberta tax on $200,000:
$148,269 at 10% = $14,827
$29,547 at 12% = $3,545
$22,184 at 13% = $2,884
Alberta tax before credits: $21,256
Basic personal amount credit: −$2,241
Net Alberta tax: ~$19,015
Total tax on RRSP: ~$59,707
Net to heirs from RRSP: ~$140,293
At an effective rate of roughly 30% on $200,000, the RRSP delivers approximately $140,000 to heirs. If the deceased had other income in the year of death — employment income, pension payments, or investment income — the RRSP amount would be stacked on top, pushing more of it into higher brackets. A $200K RRSP on top of $80K in other income would face marginal rates of 38–48%, potentially consuming $74,000–$84,000 in tax.
RRSP Withholding: Estate as Beneficiary vs. Named Beneficiary
If the estate is the RRSP beneficiary, the financial institution pays the RRSP proceeds to the estate with no withholding tax at source. The estate then pays the tax owing when it files the deceased's final return. If a named individual (like an adult child) is the beneficiary, the institution pays the funds directly to that person — but still does not withhold tax at source in most provinces. The tax is still owed by the estate on the final return. If the estate cannot pay, the CRA can assess the named beneficiary directly under subsection 160.2(1).
This creates a practical risk: the named beneficiary receives $200,000 in cash, but the estate owes ~$60,000 to the CRA. If the estate has no other assets to cover this, the beneficiary may be personally liable. For a scenario involving estate splits among multiple heirs, see our adult child beneficiary split calculator.
Asset 2: The $80K TFSA — Completely Tax-Free
The Tax-Free Savings Account is the most estate-friendly registered account in Canada. When the TFSA holder dies:
- If a successor holder is named (spouse or common-law partner only): the TFSA continues as the surviving spouse's own TFSA. No tax, no impact on contribution room.
- If a named beneficiary is designated (anyone): the TFSA is collapsed and the full fair market value at the date of death is paid to the beneficiary tax-free.
- If no beneficiary is named: the TFSA flows into the estate and is distributed per the will — still tax-free, but subject to probate fees.
TFSA at death:
TFSA fair market value: $80,000
Income inclusion on final return: $0
Tax payable: $0
Net to heirs from TFSA: $80,000
Caveat: any growth between date of death and date of distribution is taxable to the beneficiary as income.
The $80,000 TFSA passes to heirs dollar-for-dollar. This is why TFSAs are increasingly recognized as an estate planning tool, not just a savings vehicle. For context on TFSA contribution room and how it accumulates, see our TFSA contribution room calculator.
Asset 3: The $120K Non-Registered Account — Capital Gains at 50% Inclusion
The non-registered brokerage account contains investments with a cost base of $60,000 and a fair market value of $120,000. At death, the deemed disposition triggers a $60,000 capital gain. Under 2025 rules, the first $250,000 of capital gains in the year retain the 50% inclusion rate for individuals (gains above $250,000 face 66.7% inclusion).
Non-registered account tax calculation:
Fair market value at death: $120,000
Adjusted cost base: $60,000
Capital gain: $60,000
Taxable capital gain (50% inclusion): $30,000
Tax on the $30,000 taxable capital gain:
(Stacked on top of the $200K RRSP income)
Total income on final return: $200,000 + $30,000 = $230,000
Marginal rate on the $30,000 increment: ~38%
Tax on capital gain: ~$11,400
Net to heirs from non-registered: $120,000 − $11,400 = ~$108,600
The capital gain is taxed at the deceased's marginal rate. Because the $200K RRSP has already pushed the deceased into a higher bracket, the $30,000 taxable capital gain faces the 29% federal rate plus Alberta's 12–13% provincial rate. Beneficiaries inherit the investments at a stepped-up cost base of $120,000 — meaning they owe zero capital gains tax on the same appreciation if they sell immediately. For more on how capital gains taxation works in an estate context, see our cottage capital gains calculator.
Alberta Probate Fees: The $525 Ceiling
Alberta's probate system uses a flat-fee schedule that caps at $525 for estates above $250,000. Here is the full schedule:
| Estate Value | Probate Fee |
|---|---|
| $0 – $10,000 | $35 |
| $10,001 – $25,000 | $135 |
| $25,001 – $125,000 | $275 |
| $125,001 – $250,000 | $400 |
| $250,001+ | $525 |
For our $400,000 estate, Alberta charges $525. Compare this to Ontario, which levies $15 per $1,000 on value above $50,000 — producing a $5,250 bill on the same estate. British Columbia would charge approximately $6,658. Alberta's flat fee means probate avoidance strategies (joint ownership, beneficiary designations) save far less in Alberta than in high-probate provinces. For a direct comparison of Alberta's cost advantages, see our Alberta vs. Ontario and BC cost comparison.
Total Estate After Tax: What Heirs Actually Receive
| Asset | Gross Value | Tax Payable | Net to Heirs |
|---|---|---|---|
| RRSP ($200K) | $200,000 | ~$59,707 | ~$140,293 |
| TFSA ($80K) | $80,000 | $0 | $80,000 |
| Non-registered ($120K) | $120,000 | ~$11,400 | ~$108,600 |
| Probate fees | — | $525 | −$525 |
| Total | $400,000 | ~$71,632 | ~$328,368 |
Tax estimates assume no other income in the year of death and use 2025 federal/Alberta brackets. Actual results will vary based on other income, credits, and deductions available on the final return.
The estate delivers approximately $328,000 out of $400,000 to heirs — an effective tax rate of about 18% across the entire estate. But the rate is wildly uneven across asset classes: the RRSP loses ~30%, the non-registered account loses ~10%, and the TFSA loses nothing. This is the core insight of estate-level tax planning: where the money sits matters more than how much there is.
What If the Deceased Had a Surviving Spouse?
The scenario above assumes no surviving spouse. If a spouse or common-law partner survives, the tax picture changes dramatically:
- RRSP: Rolls to the surviving spouse's RRSP or RRIF on a fully tax-deferred basis. No deemed disposition, no tax. The $200,000 continues growing tax-deferred until the surviving spouse withdraws or dies.
- TFSA: If a successor holder is named, the TFSA continues as the spouse's own. No tax, no reduction in their own TFSA contribution room.
- Non-registered: Can be transferred to the surviving spouse at the adjusted cost base (not fair market value), deferring the capital gain until the surviving spouse disposes of the assets or dies.
With a surviving spouse, the same $400K estate passes with zero tax at the first death. All tax is deferred to the second death. This is why spousal beneficiary designations are the single most impactful estate planning decision for married couples. For more on how spousal inheritance works, see our spousal beneficiary inheritance calculator.
Alberta vs. Ontario: Probate Cost Comparison on a $400K Estate
Alberta's flat-fee probate structure is one of the lowest in Canada. Here is how the same $400,000 estate would be treated in each province from a probate perspective:
| Province | Probate Fee | Savings vs. Ontario |
|---|---|---|
| Alberta | $525 | $4,725 |
| Ontario | $5,250 | — |
| British Columbia | ~$6,658 | −$1,408 |
Ontario charges $5 per $1,000 on the first $50,000 plus $15 per $1,000 on the remainder. BC charges approximately $6 + $14 per $1,000 above $50,000.
The income tax on the RRSP deemed disposition (~$59,700) dwarfs the probate fees in every province. This is why estate planning professionals in Alberta focus less on probate avoidance and more on registered account beneficiary designations and income-splitting strategies in the years before death.
Planning Takeaways: Reducing the Tax Hit on an Alberta Estate
Based on the math above, the highest-impact strategies for reducing tax on a similar estate are:
- Name a qualifying beneficiary on the RRSP: A surviving spouse, common-law partner, or financially dependent minor child or grandchild allows a full tax-deferred rollover. This eliminates the ~$60,000 tax bill entirely.
- Draw down the RRSP during retirement: Converting RRSP withdrawals to income over 20+ years of retirement spreads the tax across lower marginal brackets, instead of concentrating $200,000 in a single tax year.
- Maximize TFSA contributions annually: Every dollar shifted from an RRSP to a TFSA (via withdrawal and re-contribution) reduces the deemed disposition exposure at death. This only makes sense if current-year tax on the RRSP withdrawal is lower than the expected marginal rate at death.
- Harvest capital losses in non-registered accounts: Realized capital losses in the year of death (or the preceding year, via a carry-back) can offset the capital gains on the non-registered account's deemed disposition.
Important Disclaimer
This article provides general information about Canadian tax treatment of estates in Alberta and is not legal, financial, or tax advice. All calculations are simplified illustrations using 2025 federal and Alberta tax brackets, and assume no other income, credits, or deductions on the final return. Actual tax will vary based on the deceased's complete tax situation, including employment income, pension income, other investment income, and available credits. The 2025 capital gains inclusion rate changes (66.7% above $250,000 for individuals) are included where applicable. Probate fees reflect Alberta's Surrogate Court fee schedule. Consult a qualified estate lawyer and tax professional for advice specific to your situation.