As the saying goes, there are only two certainties in life: death and taxes. In Canada, the government won’t even let a little thing like death stand in the way of the latter. As an estate executor, one of your responsibilities is to file taxes on behalf of your deceased friend or family member. Here are a few things you should keep in mind.
Send a Death Notice to the Taxman. While living people will file taxes using T4s, T3s, T4A, T5s, and other documentation, as the executor of an estate, you’ll also need a T1 income tax return for most provinces and territories, or a TP1 in Quebec to file a final return. For a compex estate, you may need all of these forms as you must claim all income from all sources for the estate. If the deceased employed an accountant or worked with an estate advisor, you may wish to contact them. They’ll likely have invaluable insight on the deceased’s investments, business income documentation, and documentation on capital gains. They may also be aware of other sources of income.
As the executor, you are additionally responsible for advising the CRA, Revenu Quebec (if the deceased was a Quebec resident), Service Canada, and the deceased’s employer of the death. They’ll need to know the date of the death, and they’ll likely want a copy of the death certificate, the deceased’s SIN, and a copy of the documents proving you are the legal representative.
When are Final Taxes Due? Most living Canadians must file their taxes by April 30th (though self-employed Canadians have a little more time). If you are filing on behalf of someone who died between January 1st and October 31st, you’ll be held to that same April 30th deadline as everyone else. However, if the death occurs between November 1st and December 31st, taxes will be due exactly 6 months from the date of death.
However, it’s best if you don’t wait until the last minute. This is because the CRA (or Revenu Quebec) will issue a clearance certificate after the final tax return has been received and processed. The certificate will confirm all taxes are paid, which permits you to proceed with the distribution of remaining assets to the heirs.
Remember that as the executor, you are liable for all taxes up to the value of the estate. What this means is, if you begin to distribute assets before receiving the clearance certificate and those assets are needed to pay taxes, you personally will have to pay the tax. Working with an estate advisor can help you know which assets can safely be distributed earlier and which assets to hold onto until you’ve obtained the clearance certificates.
Filing a final return for a complicated estate can be challenging. But our clients offer their executors two final gifts: a clear estate plan and a team of advisors who are are intimately familiar with their estate and assets. Choosing an executor is a very personal decision, and we believe we speak for almost everyone when we say that no one wants to burden their executor unnecessarily. Contact the expert estate advisors at MacMillan today, and let us help you create an estate plan that makes this difficult time as easy as possible for your loved ones.