Executor Duties for Final Tax Returns and Clearance Certificates in BC

Taxes are one of the parts of administering an estate that can come back on you personally. As an executor, you stand in the deceased's place with the Canada Revenue Agency, and the order in which you do things matters.

This article explains the general duty to file returns, what a clearance certificate is, and how it fits with the other timing rules for distributing an estate in British Columbia. Which returns apply to a particular person depends on their circumstances, so confirm with an accountant or lawyer.

This article covers the law of British Columbia.

Why tax is part of your job

BC government guidance says an executor's basic duties include listing all assets and debts, paying valid debts, filing tax returns and distributing the estate. A personal representative has the same authority over the estate as the deceased would have had, subject to the will and to other laws.

A grant of probate or administration gives the personal representative exclusive authority to administer the estate. An applicant for a grant must also make a diligent search and inquiry for the deceased's property and liabilities. That search is a natural place to start when you are working out what tax may be owing.

The exact returns required depend on the deceased's income, assets and whether they had a business. An accountant can confirm which returns apply and their filing dates.

What a clearance certificate is

Before distributing property they control, a legal representative must obtain a clearance certificate from the Minister of National Revenue. The certificate certifies that the taxpayer's amounts owing are paid or secured.

This matters because a legal representative who distributes property without a clearance certificate is personally liable for the unpaid tax, up to the value of the property distributed. In plain terms, if you pay beneficiaries too soon and tax is later owing, the CRA can look to you.

The order of steps

The CRA says to request a clearance certificate on Form TX19 only after all returns are filed, notices of assessment are received and all amounts are paid or secured. It should not be requested at the same time as filing the returns. Form GST352 is also needed if the deceased had a GST/HST number.

• Identify and file all required returns with an accountant's help.
• Wait for the notices of assessment.
• Pay or secure all amounts owing.
• Then request the certificate on Form TX19, with Form GST352 if there was a GST/HST number.
• Distribute only after the certificate is received.

Processing times and form details change, so check the CRA website when you are ready to apply.

How tax fits with the other timing rules

Tax is not the only obstacle to early distribution. A personal representative must not distribute the estate within 210 days after the grant of probate or administration is issued, unless the court orders otherwise. An executor who distributes while debts remain unpaid may also be held personally liable for them.

The 210-day bar has exceptions. Where there is a will, the estate may be distributed earlier if all beneficiaries with an interest and everyone who could bring a wills-variation claim consent. Where there is no will, early distribution requires the consent of all intestate successors entitled to a share. Even after the 210 days, distribution needs court consent if a proceeding is under way that may affect the distribution. Early distribution under an exception does not remove the clearance certificate requirement.

To help bring other claims forward, a personal representative may publish a notice to creditors and other claimants in the Gazette, setting a deadline of at least 30 days. Where the representative gives notice disputing a claim, the claimant must start a court proceeding within 180 days after the notice, or after the claim falls due if it was not yet due.

What to do next

Keep records of every return, assessment and payment, since you may need to show them to beneficiaries or the court. Executors must prepare accounts showing the estate's assets, receipts, disbursements and distribution, and have them approved by the court or by the people receiving the assets.

If you are unsure how to handle a question about managing the estate, an executor, administrator or trustee may petition the court for its opinion, advice or direction without starting any other proceeding.

• Collect the deceased's past returns and income slips.
• Ask an accountant which returns are needed and when.
• Hold back enough to cover tax before distributing.
• Do not distribute until the clearance certificate arrives.
• See a lawyer if you are unsure whether debts or tax are fully dealt with.

Frequently asked questions