Who is responsible for paying the deceased's income taxes in Ontario?

The executor (estate trustee) is responsible for filing the deceased's final personal income tax return — called the terminal return — and for paying any taxes owed from estate funds before distributing assets to beneficiaries. The terminal return covers income earned in the year of death up to the date of death.

If the executor distributes assets to beneficiaries before obtaining a clearance certificate from the Canada Revenue Agency, they can be personally liable for any unpaid tax debts. A clearance certificate confirms the CRA is satisfied that all taxes have been paid and releases the executor from this personal liability.

In addition to the terminal return, the executor may need to file optional separate returns — for example, a rights and things return or a return for periodic payments — which can reduce overall tax by spreading income across returns that each access basic personal amounts.

Tax planning on death is complex. The executor should engage an accountant experienced in estate tax matters early in the administration process, before filing any returns or making distributions.