CRA Clearance Certificates for Ontario Estates: When and How to Apply

If you are an estate trustee, the safest time to hand out the estate is after CRA confirms the deceased's tax is dealt with. A clearance certificate is the document that does that, and it affects your own exposure if something is unpaid.

This article explains what the certificate does, when to apply, what to send, and the situations where it may not be available. Because timing affects when beneficiaries are paid, it helps to plan early.

What a clearance certificate does

Under the Income Tax Act, every legal representative other than a trustee in bankruptcy must obtain a certificate from the Minister before distributing property under their control. The certificate confirms that all tax amounts have been paid or that security has been accepted.

If you distribute without a certificate, you can be personally liable for the unpaid amounts, up to the value of the property distributed, and the Minister can assess you at any time. That is the main reason trustees wait before paying beneficiaries.

Once a certificate is issued, liability for unpaid tax rests on the estate, trust, corporation, beneficiaries or others who received the distributed assets, and no longer on the representative.

It has limits. The certificate covers only amounts owing when it is issued, and if more assets are found later, another certificate is needed before distributing them.

When to apply

Timing is where trustees often go wrong. You file Form TX19, Asking for a Clearance Certificate, after all returns have been filed and assessed and the taxes, CPP, EI, interest and penalties have been paid or secured. Estates registered for GST/HST also file Form GST352. Do not send the request at the same time as the returns.

That usually means the final T1 return and any T3 returns for the estate need to be done first. The estate's T3 return and balance owing are due no later than 90 days after the trust's tax year-end.

The final return is due April 30 of the year after the death for a death between January 1 and October 31, and six months after the death for a death between November 1 and December 31. A later filing date can apply when the deceased or their cohabiting spouse or common-law partner ran a business, but any balance owing must still be paid by the regular payment due date, and the later filing date does not apply if the business's expenditures were mainly for tax shelter investments. Filing late can bring a penalty of 5% of the balance owing plus 1% for each full month late, up to 12 months, along with compound daily interest on unpaid amounts.

What to send and how long it takes

For an estate, CRA asks for the following documents:

• A signed copy of the will, or the administrator's appointment if there is no will.
• Proof of your status as legal representative.
• A list of assets with their date-of-death values.
• A statement of distributions already made.
• A proposed plan for the rest of the estate.
• The names and tax numbers of beneficiaries receiving non-cash property.

CRA acknowledges the request within 45 days, and the assessment can take up to 120 days if the documents are complete. Missing information can slow things down, so check the list carefully before sending.

To deal with CRA at all, the representative sends a copy of the death certificate or a funeral director's statement of death, and a complete copy of the will naming the executor. If there is no will or executor, Form RC552, Register as Representative for a Deceased Person, is used.

When a certificate may not be available, and paying tax over time

If the estate is insolvent, meaning it does not have enough assets to pay all the tax, interest and penalties owed to CRA, a clearance certificate generally cannot be obtained. How debts rank in an insolvent estate is a legal question, so get advice before paying anyone.

Separately, for tax arising from deemed dispositions at death, the legal representative can elect, and provide security acceptable to the Minister, to pay that tax in up to 10 equal consecutive annual instalments. The first instalment is due on the normal payment date and each later one on the anniversary of that date. Whether this suits your estate depends on the facts, so raise it with your accountant or lawyer.

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. The certificate is part of that step, and how it applies to your estate depends on the facts.

What to do next

• List every return that must be filed, including the final return and any T3 returns.
• File the returns and wait for the assessments.
• Pay or arrange security for what is owing, including interest and penalties.
• Gather the documents listed above and confirm they are complete.
• File Form TX19, plus Form GST352 if the estate is registered for GST/HST.
• Hold back distributions until the certificate arrives, and talk to a lawyer if beneficiaries are pressing for payment.

Frequently asked questions