Let us guide you through this difficult journey
Have you agreed to be the executor and now need to understand your duties?
Between the deceased’s Final Return, the potential Rights and Things Return, to the T3 Estate Return and the final clearance certificate, the executor has a lot of things to know to be able to fulfill one’s responsibilities. But our experienced and compassionate team of dedicated estate specialists will assist you with navigating this difficult process.
We will empower you to understand every decision you will have to make so you can have true peace of mind
To learn about the responsibilities of an executor:
You meet with us to learn how we can help
We take care of everything, keeping you informed throughout the process.
You meet with us to review the completed returns. We review your notices of assessments and submit your request for a clearance certificate. You enjoy true peace of mind.
If you have any question, please feel free to reach us
For your information, see our fees for Income Tax Returns for Deceased Individuals but keep in mind that every case is unique and you may discover unknown items along the process obtaining your clearance certificate.
What are the responsibilities of an executor (or administrator) of the Estate of a deceased individual?
As the legal representative of an estate, it is your responsibility to:
- File all required returns for the deceased
- Ensure that all taxes owing are paid
- Let the beneficiaries know which amounts they receive from the estate are taxable
These responsibilities include the filing of the deceased individual’s Final Tax Return.
A Final Tax Return for a deceased individual involves reporting the income earned by the deceased up until the date of their death.
It has many of the same qualities as one for a living taxpayer.
However, there is much more to consider from a tax perspective, such as:
- The deemed disposition of the deceased’s assets upon their date of death - Final Return
- Whether any amounts can be reported on a Rights and Things return
- The income earned by the deceased’s assets after date of death - T3 Estate Return
- Whether a clearance certificate is required
These are just some of the considerations that provide pitfalls and opportunities.
We have the knowledge and experience to help you fulfill all tax filing requirements and responsibilities while making sure that the estate does not pay more than its fair share of tax.
What is “deemed disposition”?
A deceased taxpayer is deemed to have disposed of all their property at fair market value on their date of passing. (There are exceptions to these rules when there is a surviving spouse.)
As a result, accrued capital gains and losses on these properties will be triggered upon death and must be reported on the Final Return.
Examples of property that are subject to deemed disposition rules:
- Cottage or cabin
- Land that exceeds 1.25 acres
- Farmland*
- Rental house
- Unregistered investments
- Balance of RRSP and RRIF
- Shares in a private corporation*
*Our team can advise on the criteria for Qualified Farm Property and Qualified Small Business Corporation Shares and whether the deceased can possibly take advantage of their lifetime Capital Gains Exemption.
What is a spousal roll-over?
Assets of the deceased that are transferred to a surviving spouse are rolled over at cost; effectively, there would be no capital gains or losses to be calculated.
In some instances, the surviving spouse may create future tax savings by electing out of the rollover, and dispose of the deceased’s assets at fair market value.
This sort of tax planning can be considered during the preparation of the Final Return.
What is a “Rights and Things Return”?
In some cases, it may be worthwhile to file an elective Rights and Things Return. In general, Rights and Things include most income that was earned by the deceased up to their passing, but not received until after their date of death. Rights and Things Returns have access to the same graduated rates as final returns and can duplicate the claim of specific tax credits. This can reduce or eliminate the tax on qualifying income.
We can help you consider whether the potential tax savings of filing a Rights and Things Return is worth the additional time and effort.
What is a “T3 Estate Return”
When a person dies, their estate comes into existence at that time as a matter of law and the estate will take ownership of the deceased’s assets.
In general, income earned by the estate’s assets is reported on a T3 Estate Return.
T3 Estate Returns may need to be filed annually as long as the Estate continues to own assets.
Some examples of income reported on a T3 Estate Return are as follows:
- Interest earned on term accounts and Guaranteed Investment Certificates (GIC)
- Dividends earned from corporate shares and mutual funds
- Increases in the value of TFSA, RRSP, and RRIF accounts
- Rental income earned on a property
- Proceeds received upon the sale of property
- Deemed proceeds received upon the transfer of property to a beneficiary
- $2,500 CPP death benefit
How long will the tax returns take to complete?
The timelines for the preparation of these returns vary. Expectations will be discussed at your initial meeting with one of our accountants.
The filing due date for Final Returns is typically April 30 of the year following date of passing but is extended to 6 months after the date of death if the individual passes away between November 1st and December 31st.
What is a Clearance Certificate?
A clearance certificate:
- Confirms that an estate of a deceased person or a corporation has paid all tax, interest, and penalties it owed at the time the certificate was issued
- Allows the legal representative to distribute assets without the risk of being personally responsible for amounts the deceased, estate, trust or corporation might owe the CRA
If you have any question, please feel free to reach us
Here are a few resources you may be interested in
Contact our experienced and compassionate team of dedicated estate specialists
brenda.prychitko@talbotcpa.ca