Are Executors Personally Liable for a Deceased's Unpaid Tax in Canada?

Being named executor can feel like an honour until you learn that the tax debts of the person who died may become your concern. Many executors worry that paying out the estate to family could leave them holding a bill from the Canada Revenue Agency (CRA) years later.

This article explains when federal tax liability can land on you personally, what counts as a distribution, and how the same idea applies to GST/HST. It does not walk through the application steps for a certificate. It focuses on where the risk comes from and how it works.

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

Who counts as a legal representative

CRA describes a legal representative as a person who administers, winds up, controls or otherwise deals with a property, business or estate, and whether someone qualifies depends on the facts. So the label is not limited to a person holding a formal title.

In practice, the legal representative is typically the executor named in the will, or in Quebec the person registered as liquidator. If there is no will or executor, a person who applies to the courts may be appointed administrator under provincial or territorial law.

While you wait for a court appointment, or if none is made, you can ask CRA to recognize you for tax matters by submitting Form RC552, but that covers CRA matters only, not your other estate duties. Even so, anyone who administers or deals with the property of a person who has not filed a required return must file that person's return.

Shared liability for the deceased's tax

Under section 159(1) of the Income Tax Act, a legal representative is jointly and severally (solidarily) liable with the taxpayer for the taxpayer's unpaid amounts under the Act, to the extent of the representative's control of the taxpayer's property. CRA may also take actions in the representative's name.

In plain words, the exposure is tied to the property you control. It is not an open-ended promise to cover any debt from your own pocket, but it is real while the assets are in your hands.

Distributing without a certificate

Before distributing property in their possession or control, a legal representative (other than a trustee in bankruptcy) must obtain a certificate from the Minister, applied for in the prescribed form, showing the relevant amounts have been paid or secured.

If you distribute without one, you are personally liable for the unpaid amounts, limited to the value of the property distributed, and the Minister may assess you for that amount at any time. CRA adds that this applies whether the liability is assessed before or after the actual distribution, and that interest accrues.

The certificate itself confirms that an estate, trust or corporation has paid all income tax, GST/HST, interest and penalties owed when it was issued, or that the Minister has accepted security for payment. It also covers CPP contributions and EI premiums. Whether it reaches payroll source deductions or other program accounts is not clear from CRA's guidance, so confirm that with CRA or an accountant.

What counts as a distribution

• Distribution happens when you give up control and transfer the property, not when a beneficiary gains the right to it.
• Appropriating property, such as taking an asset for yourself, also counts as a distribution.
• Trust income paid or allocated to beneficiaries is not a distribution of property, so no certificate is needed for that income.
• You do not need a certificate before each distribution if enough property remains to cover any liability, which is the basis for a partial distribution with a holdback.

CRA gives no formula or percentage for how much to hold back. Any amount is a judgement based on the estate's tax picture, so it is worth discussing with an accountant or lawyer. There is also no small-estate exception to the certificate rule in the statute, which applies to any legal representative who distributes property.

GST/HST, and what happens after a certificate

If the deceased had a GST/HST number, the estate needs a certificate before distributing assets. Sections 270(3) and (4) of the Excise Tax Act require the representative to obtain a GST/HST certificate before distributing property or money, failing which they are personally liable up to the value distributed. CRA points to Form GST352 for this.

Once a certificate is issued, liability for any remaining tax rests on the estate, trust, corporation, beneficiaries or others who received the assets, rather than on the representative. This is not a promise that CRA can never look at the file again, so keep your records.

A certificate covers only property controlled up to the request date. If new assets are discovered later, you must obtain another certificate before distributing them, by contacting the tax services office where the original request was filed.

What to do next

• Confirm whether you are the legal representative and gather the will or court appointment.
• File the final return and any estate T3 returns, and pay or arrange security for what is owing.
• Hold off distributing, including taking property for yourself, until you have a certificate or have confirmed enough property remains to cover any liability.
• Check whether the deceased had a GST/HST number.
• Speak with a lawyer or accountant before any partial distribution or holdback.

Frequently asked questions