Estate Tax Filing in Ontario: What the Estate Trustee Must File

Estate trustees are often surprised by how many tax filings follow a death. Some are federal, some are Ontario, and several have different deadlines.

This checklist walks through the main ones in the order they usually arise. Because dates depend on the date of death and on the estate's facts, confirm the details with a lawyer or accountant.

Getting set up with CRA

The legal representative is usually the executor named in the will, and balances owing to CRA are paid out of the estate's assets. To deal with CRA, send 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.

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 final T1 return and optional returns

A final T1 Income Tax and Benefit Return must be filed for every person who dies. For a death between January 1 and October 31, the return and any balance owing are due April 30 of the following year. For a death between November 1 and December 31, they are due 6 months after the death.

Some situations change the date:

• If the deceased or a cohabiting spouse or common-law partner ran a business, the return is due June 15 of the following year for deaths from January 1 to December 15, and 6 months after the death for deaths from December 16 to 31. 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.
• If the deceased died before filing the previous year's return, that return is due 6 months after the date of death, if that is later than the normal date.
• A surviving spouse or common-law partner's own return is due on the later of their normal date and 6 months after the death, though any balance owing must still be paid by April 30.

The legal representative may also be able to file optional returns, such as a separate return for rights or things, a partner or proprietor return, or a return for income from a graduated rate estate. These can lower total tax because certain credits can be claimed more than once and each return starts again at the lowest brackets. The rights or things return is due by the later of one year after death and 90 days after the Notice of Assessment for the final return.

Missing the deadline is costly. The late-filing penalty is 5% of the balance owing plus 1% for each full month late, up to 12 months, and compound daily interest runs on unpaid amounts.

The T3 return for the estate

A T3 Trust Income Tax and Information Return is generally filed if the estate realizes any gain or receives payments after the death. A return may not be needed if the estate was distributed right after the death and earned no income before then.

The T3 and any balance owing are due no later than 90 days after the trust's tax year-end. A graduated rate estate can choose a non-calendar year-end, up to one year after the date of death. When an estate is wound up, its tax year ends on the date of the final distribution, and the final T3 is due within 90 days of that date. A graduated rate estate is taxed at graduated rates for up to 36 months after death, and it must designate itself in its first T3 return. A late T3 return can also be penalized, and one penalty that can apply is $25 a day for each day the return is late, with a minimum of $100 and a maximum of $2,500. Which penalty applies depends on the estate's situation, so it is worth confirming with an accountant or lawyer.

Clearance certificate and Ontario filings

Every legal representative other than a trustee in bankruptcy must obtain a clearance certificate before distributing property under their control. A representative who distributes without one is personally liable for unpaid amounts up to the value distributed.

File Form TX19 after all returns are filed and assessed and the tax, interest and penalties are paid or secured, and do not send it at the same time as the returns. The request includes a signed copy of the will, proof of status, a list of assets with date-of-death values, a statement of distributions already made and the proposed plan for the rest. CRA acknowledges the request within 45 days, and the assessment can take up to 120 days if the documents are complete. A clearance certificate generally cannot be obtained if the estate lacks enough assets to pay all the tax owed. If more assets are found later, another certificate is needed before distributing them.

On the Ontario side, Estate Administration Tax is paid as a deposit with the estate certificate application. An Estate Information Return must be filed within 180 calendar days after the certificate is issued, even if the value is $0. If an estimated value was used, a sworn statement of the total value is due within six months, and an amended return is due within 60 days after the actual value is given to the court.

A filing checklist

• Send CRA the death certificate and will, or file Form RC552 if there is no executor.
• Confirm the final T1 due date from the month of death.
• Decide whether any optional returns could reduce tax.
• Confirm whether the estate needs to file a T3 return, and file it on time if it does.
• File the Estate Information Return within 180 calendar days of the certificate.
• Apply for the clearance certificate with Form TX19 once assessments are done.
• Hold distributions until the certificate is issued.

Frequently asked questions