Executor Personal Liability After Distribution in Canada: Options

You distributed the estate, and now CRA has assessed you, the executor, for tax the deceased or the estate still owed. It is a stressful position, especially if the beneficiaries have already spent what they received.

This article explains where that liability comes from, what limits it, and what to think about before you respond. It cannot tell you whether you have a defence in your case. That depends on the facts, and a lawyer or accountant should review them.

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

Why the executor can be personally liable

Before distributing property in their possession or control, a legal representative must obtain a certificate from the Minister showing that the relevant amounts have been paid or secured. A representative who distributes without the certificate is personally liable for the unpaid amounts, limited to the value of the property distributed.

The Minister may assess the representative for that amount at any time. The liability applies whether the assessment comes before or after the actual distribution, and interest accrues.

Separately, a legal representative is jointly and severally liable with the taxpayer for the taxpayer's unpaid amounts, to the extent of the representative's control of the taxpayer's property.

What limits the liability

• The cap: your liability is limited to the value of the property distributed, not the full amount of any other debts.
• Who counts: a legal representative is someone who administers, winds up, controls or otherwise deals with a property, business or estate, and whether you qualify depends on the facts.
• What counts as distribution: it occurs when you give up control and transfer the property, not when a beneficiary gains the right to it, and appropriating property for yourself also counts.
• Holdbacks: you do not need a certificate before each distribution if enough property remains to cover any liability.

If the deceased had a GST/HST number, a similar rule applies under the Excise Tax Act, making the representative personally liable up to the value distributed if no GST/HST certificate was obtained.

Defences and objections

Whether you can challenge an assessment depends on what it says and why it was issued. Possible questions include whether you were a legal representative at all, whether the property was actually distributed, whether the amount exceeds the value distributed, and whether the underlying tax figures are correct.

How the dispute process and its deadlines apply depends on your situation, so it is worth confirming with a lawyer as soon as you receive an assessment. Read any notice carefully and do not let time pass while you decide what to do.

If you did obtain a certificate before distributing, liability for any remaining tax rests on the estate, trust, beneficiaries or others who received the assets rather than on you. A certificate covers only property controlled up to the request date, so property discovered later needs another certificate before it is distributed.

Recovering from beneficiaries

Many executors ask whether they can get the money back from the people who received it. Whether and how you can do that depends on the will, the estate documents, the amounts received and the law that governs the estate, so it is a question for a lawyer. Do not assume beneficiaries will agree to repay, and do not promise anything to CRA on their behalf.

Practically, it helps to have a clear record of who received what and when, since your liability is measured by the value of the property distributed.

What to do next

• Keep the notice of assessment and note every response date on it.
• List each distribution: date, recipient and value.
• Gather the will, the document proving you are the representative, and the returns filed for the deceased and the estate.
• Contact CRA about the amount and about security if payment is difficult, since security arrangements should be discussed with CRA first.
• Speak with a lawyer or accountant before you pay, object or contact the beneficiaries.

For any property still held, do not distribute it until you understand whether a certificate is needed.

Frequently asked questions