CRA Clearance Certificate: When Executors in Canada Need One

Before an executor hands out the estate, one tax step matters more than most: the clearance certificate. It is the CRA's confirmation that the deceased's tax amounts have been paid or secured.

This article explains why the certificate exists, how to ask for it, when to ask, and what it does and does not do. It is general information and a lawyer or accountant can tailor it to your estate.

This article covers Canadian federal tax law, which applies in every province.

What a clearance certificate is and why it matters

The Income Tax Act requires a legal representative to obtain a certificate from the Minister before distributing property under their control. The certificate confirms that the amounts have been paid or that security for them has been accepted.

The reason it matters is personal exposure. Without the certificate, the representative is personally liable for those amounts to the extent of the value of the property distributed, and can be assessed at any time.

Separately, a legal representative is jointly and severally liable with the taxpayer for unpaid amounts, but only to the extent the representative controls the taxpayer's or estate's property, and for obligations relating to the representative's responsibilities. In plain words, this is why executors are careful about tax before property leaves their hands.

How to request one

A certificate is requested on Form TX19 (Asking for a Clearance Certificate) and issued on Form TX21. You can submit by mail, fax or the Submit Document feature in CRA portals, with attachments such as the will and a proposed distribution statement.

• Form TX19 is the request.
• Form TX21 is the certificate itself.
• The will and a proposed distribution statement are examples of attachments to include.

When to ask

TX19 should not be filed until the notice or notices of assessment have been received, unless an exception applies. That means the returns come first. The final return is generally due April 30 of the year after death for a death from January 1 to October 31, and 6 months after death for a death from November 1 to December 31.

The final return carries the tax on the deemed sale of capital property at death, since there is no inheritance tax. Income the estate earns after death, and gains on property the estate sells after death, are reported on the estate's T3 return instead of the final return. The table below sets out the filing dates that commonly matter.

Missing these dates can be costly. With a balance owing, the late-filing penalty is 5% of the balance plus 1% for each full month late, up to 12 months, and it can be higher if a late-filing penalty was assessed in any of the 3 previous years; unpaid balances bear compound daily interest from the day after the due date. A late T3 return can also attract an alternative penalty of $25 per day (minimum $100, maximum $2,500), even with no balance owing.

How long a certificate takes to issue depends on the circumstances. It is wise to build in time before you plan to distribute, and to check the CRA's current service information.

What the certificate does not do

A new certificate is not required before each distribution, as long as enough property is retained to cover any potential liability. This can matter if an estate is distributed in stages.

The certificate is not a guarantee against all later tax. It does not stop the CRA from recovering unpaid tax later from an estate or beneficiaries. Also, if tax cannot be paid right away, delaying payment requires acceptable security and Form T2075, and interest still accrues.

What to do next

• File the final return and any T3 or optional returns first.
• Wait for the notice or notices of assessment before sending TX19, unless an exception applies.
• Assemble the will and a proposed distribution statement.
• If you distribute in stages, retain enough property to cover any potential liability, so that a new certificate is not required before each distribution.
• Do not distribute property under your control until you have obtained the certificate from the Minister. A lawyer can confirm how this applies to your estate.
• Keep the TX21 with the estate records.

Optional returns, such as Rights or Things, are not required, but the legal representative may file them because they may reduce tax by allowing certain credits to be claimed more than once. Whether they help depends on the estate, so it is worth asking an accountant.

If the estate is complicated, such as business interests, property outside Canada or a disagreement among beneficiaries, a lawyer can help you decide the right order of steps.

Frequently asked questions