Is an Executor Personally Liable for the Deceased's Unpaid Income Tax in Canada?
This answer covers Canadian federal tax law, which applies in every province.
Yes, an executor can be personally liable for the deceased's unpaid income tax, mainly if you distribute estate property without first getting a clearance certificate from CRA. Under section 159(2) of the Income Tax Act, a legal representative must obtain the certificate before distributing property in their possession or control.
If you distribute without it, you are personally liable for the unpaid amounts, limited to the value of the property distributed, and the Minister may assess you for that amount at any time. The liability applies whether the assessment comes before or after the actual distribution, and interest accrues. Distribution happens when the representative gives up control and transfers the property, not when the beneficiary gains the right to it. Appropriating property also counts as a distribution. A representative need not obtain a certificate before each distribution if enough property remains to cover any liability.
Separately, section 159(1) makes a legal representative jointly and severally liable with the taxpayer for unpaid amounts, to the extent of your control of the taxpayer's property. Once a certificate is issued, liability for any remaining tax rests on the estate, beneficiaries or others who received the assets, rather than you.
Key takeaways
- If you distribute property without a clearance certificate, you are personally liable for the unpaid amounts, up to the value of the property distributed, though you need not get a certificate before each distribution if enough property remains to cover any liability.
- Your liability is capped at the value of the property distributed, and interest accrues.
- Section 159(1) also makes a legal representative jointly and severally liable with the taxpayer, to the extent of the representative's control of the taxpayer's property.
- Once a certificate is issued, liability for any remaining tax rests on the estate, beneficiaries or others who received the assets rather than the representative.