Does an Executor Need a CRA Clearance Certificate in Alberta?

You have been named executor, or appointed administrator, and the beneficiaries are asking when they will be paid. Before you send out money, there is a federal step that catches many people by surprise: the CRA clearance certificate.

The rules about the certificate are federal and are the same across Canada. How they apply to your estate depends on your situation, so it is worth confirming the details with a lawyer. This article explains what the certificate is, when to ask for it, and what to do while you wait.

This article covers the law of Alberta.

What a clearance certificate confirms

A clearance certificate confirms that an estate, trust or corporation has paid the income tax, GST/HST, interest and penalties owed when the certificate was issued, or that the Minister has accepted security for them.

In plain words, it is the CRA telling you that, as of that date, the estate's known tax bills have been dealt with. That is what lets you distribute with confidence.

Much of the tax involved sits on the deceased's final return. A person is considered to have sold all their property just before death, even though no sale occurs, and this may create a capital gain or loss. The tax on that gain falls on the final return and is paid out of the estate, not by the heir. Likewise, the fair market value of an RRSP is treated as received just before death and is included in income in the year of death. Exceptions exist, such as the rollover for a spouse or common-law partner, so how this applies depends on your situation and is worth confirming with a lawyer or accountant.

Why distributing without one is risky

Under Income Tax Act s. 159(2)–(3), the legal representative must obtain a clearance certificate before distributing property under their control. If you distribute without one, you are personally liable for the amounts owing, up to the value of the property you distributed.

That means a tax debt the CRA finds later can come out of your own pocket, not only out of the estate. Beneficiaries may press you to pay out early, but the risk of that decision sits with you.

Timing of the returns matters too. A final return for a person who died between January 1 and October 31 is due April 30 of the following year, while a death between November 1 and December 31 gives six months after the date of death. Unpaid tax bears compound daily interest from the day after the due date until it is paid in full. Exceptions apply, for example where the deceased or their spouse or common-law partner carried on a business.

When to apply and what to send

Request the certificate only after the returns are filed and assessed and the taxes are paid or secured. Do not submit the request with the returns, because that delays assessment. The returns involved will usually include the final T1 return and, where the estate needs one, a T3 trust return.

The request is made on Form TX19, Asking for a Clearance Certificate, plus Form GST352 if the deceased had a GST/HST number. The documents required include the following:

• The will and probate documents, or the administrator appointment.
• A list of assets showing adjusted cost base and fair market value.
• Statements of distributions made and proposed.

Gather these documents before you start, since the request needs the will and probate documents or the administrator appointment.

How long it takes and what limits apply

The CRA sends an acknowledgement within 45 days, and assessment can take up to 120 days if all documents are provided. If you have no response within 120 days, contact the CRA.

What to do next

Because the process can take months, plan for the wait. Holding back enough money until the certificate arrives is the practical way to protect yourself, and it is worth confirming with a lawyer or accountant how much to hold in your situation.

Do not let a T3 return slip while you wait. A late T3 may attract a penalty of $25 a day, with a minimum of $100 and a maximum of $2,500, even if nothing is owing.

• Confirm you have the probate documents or administrator appointment in hand.
• File the final T1 return and any T3 return, and wait for the assessments.
• Pay the tax owing, or arrange security with the CRA.
• Prepare the asset list with adjusted cost base and fair market value.
• Send Form TX19 (and GST352 if there was a GST/HST number) with your documents.
• Hold back funds until the certificate arrives.
• If assets turn up later, get advice before distributing them.

Frequently asked questions