Is an Executor Personally Liable for the Estate's Taxes in Ontario?

Being named executor does not usually mean paying the estate's taxes from your own money. The estate's assets are meant to cover them. The risk arises when assets leave the estate before the tax is dealt with.

This article explains when the CRA can look to you personally, how the clearance certificate works, and the Ontario tax that applies when a certificate of appointment is sought.

The general rule: the estate pays, not you

Before the estate is distributed, the debts and the funeral and burial expenses are to be paid, and tax owed by the deceased is one thing to settle first. The returns are filed and assessed, and the income taxes paid or secured, before a clearance certificate is requested on Form TX19. The trouble begins if you distribute those assets to beneficiaries and the estate can no longer cover the tax.

If you pay an expense yourself, a trustee may pay it personally and then recover it from the trust property when the trustee is of the opinion that it was properly incurred in carrying out the trust.

When the CRA can pursue you personally

Before distributing any property, the legal representative of a deceased taxpayer must obtain a certificate from the Minister, confirming that all tax amounts have been paid or that security for them has been accepted. A legal representative who distributes property without obtaining it is personally liable for the unpaid tax amounts, up to the value of the property distributed, and the Minister may assess them at any time.

So your exposure is tied to what you handed out. It applies to any distribution, including interim ones. The Trustee Act protection for creditor claims you had no notice of is a separate rule, and the clearance certificate requirement is its own rule under the Income Tax Act. Do not assume one replaces the other.

How to get the clearance certificate

The certificate is requested on Form TX19, "Asking for a Clearance Certificate", after the required returns are filed and assessed and all income taxes are paid or secured. Supporting documents include a statement of distributions made to date and a statement of the proposed distribution of any holdback or residual amount. An estate with a GST/HST number also needs Form GST352 for clearance.

There is no official fixed percentage to hold back. How much to keep depends on the facts, so ask an accountant.

Ontario Estate Administration Tax

For applications made on or after January 1, 2020, Estate Administration Tax is $15 for every $1,000 (or part thereof) of estate value over $50,000, and estates of $50,000 or less pay no tax. Jointly owned assets that automatically pass to the surviving owner are excluded from the estate's value, as are RPPs, RRSPs, RRIFs and TFSAs with a beneficiary designation.

The Estate Information Return is due within 180 calendar days after the certificate is issued, and an amended return within 60 days of learning the information is incomplete or inaccurate. Failing to file, or filing a false or misleading return, can lead to a fine of at least $1,000 and up to twice the tax payable, up to two years' imprisonment, or both.

Real estate outside Ontario is excluded from the value, while vehicles and vessels are included wherever they are. For a resealed or ancillary grant, only assets located in Ontario are used.

What to do next

• Do not distribute any property until the clearance certificate is in hand.
• File all required returns and pay the tax from estate assets.
• Keep records of each payment and distribution.
• Diarize the Estate Information Return deadline.
• Get advice before making any interim distribution or holdback.

Before distributing any property, the legal representative must obtain a clearance certificate from the Minister confirming that all tax amounts have been paid or that security for them has been accepted. A representative who distributes without it is personally liable for the unpaid tax, up to the value of the property distributed, and the Minister may assess them at any time. If you have already distributed property, get advice promptly. Whether any court relief could apply to your situation depends on the facts, so it is worth confirming with a lawyer.

Frequently asked questions