Is income earned by an estate after death taxed differently in Ontario?

Yes. Once a person dies, their estate becomes a separate taxpayer and must file its own income tax returns (T3 trust returns) for any income earned while the estate is being administered. An estate can qualify as a "graduated rate estate" (GRE) for up to 36 months after death, meaning it is taxed at graduated (lower) personal income tax rates rather than the flat top rate that normally applies to trusts. Only one estate per deceased person can be a GRE.

After the GRE period ends, the estate is taxed at the highest marginal rate on all income earned. This can be a meaningful cost if an estate takes years to wind up — for example, if real property is difficult to sell or litigation arises.

During administration, income generated by estate assets — interest, dividends, rents — must be tracked and reported on the estate's T3 returns. The executor is responsible for filing these returns and paying any resulting taxes before distributing assets to beneficiaries. Failure to do so can expose the executor to personal liability for unpaid taxes.