Do beneficiaries have to pay tax on an inheritance in Canada?

Generally, no: Canada has no inheritance tax. Instead, the person who died is taxed on their final return as if they had sold their capital property, such as investments, a cottage or business shares, at fair market value. Their RRSPs and RRIFs are generally taxable too, unless they pass to a spouse or partner. The estate pays that tax before anything is distributed, so beneficiaries usually receive their inheritance tax-free. Life insurance can pay the tax, so nothing has to be sold.