Are Debts and Taxes Paid From an Estate Before Beneficiaries Get Anything in Ontario?

Yes, in general. An Ontario estate trustee's duties include winding up the deceased's affairs and paying taxes, bills and other debts before distributing what is left. Funeral and burial expenses and debts are also paid before the estate is distributed to beneficiaries. Balances owing to CRA are paid out of the estate's assets.

The trustee's own risk is the main reason to be careful. Every legal representative other than a trustee in bankruptcy must obtain a certificate from the Minister before distributing property under their control, confirming that all tax amounts have been paid or that security has been accepted. A representative who distributes without one is personally liable for the unpaid amounts, up to the value of the property distributed.

If the estate is short, the position changes. A clearance certificate generally cannot be obtained if the estate does not have enough assets to pay all the tax, interest and penalties owed to CRA. Beneficiaries' shares come after these debts, so they can shrink when the estate cannot cover them. How the available assets are ranked among CRA, funeral costs and other creditors depends on the facts and on Ontario law, so get legal advice before paying anyone.