Final Tax Returns for a Deceased Person in Ontario: Deadlines

If you are the executor, one of your first jobs is the tax paperwork. The CRA expects a final return for the year of death, and sometimes more than one return.

This article sets out the dates and the order of steps. How they apply depends on your situation, so an accountant or the CRA can confirm what fits your estate.

The final T1 return: due dates

A final T1 return must be filed for every person who dies.

The business dates apply if the deceased, or a spouse or common-law partner living with them, was carrying on a business. Payment is still due on the regular date.

Optional returns and the estate's own return

There are three optional returns: rights or things, partner or proprietor, and income from a graduated rate estate. The Return for Rights or Things and the estate's T3 return have the deadlines below.

• Return for Rights or Things: due one year after death or 90 days after the final return's assessment notice is sent, whichever is later.
• The estate's T3 return: due 90 days after the trust's tax year-end.

Only graduated rate estates and qualified disability trusts are taxed at graduated rates. Other testamentary trusts pay the top rate, and an estate stops being a graduated rate estate if it still exists 36 months after the death.

A graduated rate estate is also a listed trust, but it may still have to file a T3 return. A trust may deduct income that became payable to its beneficiaries in the year, so that income is taxed to the beneficiary rather than the trust.

Deemed disposition and the spouse rollover

At death, a taxpayer is deemed to have disposed of each capital property immediately before death at fair market value. That can create a tax bill on the final return.

There is a deferral if the property passes to a spouse or common-law partner resident in Canada, or to a Canadian-resident trust created by the will. The trust qualifies only if the spouse is entitled to all its income and no one else can receive or use its income or capital during the spouse's lifetime. The property must vest indefeasibly within 36 months after death.

A spousal or common-law partner trust is deemed to dispose of its capital property at fair market value on the day the spouse dies, while other trusts face a deemed disposition every 21 years. How these rules apply to a particular estate depends on the facts, so it is worth confirming with an accountant.

Clearance certificate before you distribute

Before distributing property, a legal representative must obtain a clearance certificate from the Minister (Form TX19). Distributing without one makes the representative personally liable for unpaid tax, up to the value of the property distributed.

Do not ask for it at the same time as filing the returns. Ask after all returns are assessed, the tax is paid or secured, and proof of your authority has been sent to the CRA. You do not need a certificate before each distribution if you keep enough property to pay any liability to the CRA.

Creditors are a separate question from the CRA. Once an estate trustee has given the court-style notice to creditors and the time in the notice has run out, they may distribute to the people entitled, and they are not liable for assets distributed if they had no notice of a claim at the time. A creditor can still follow the estate assets into the hands of the people who received them. This protection cannot be used to cut off a missing beneficiary.

Funeral expenses cannot be deducted on the final return. The CPP death benefit can go to the person or institution that paid, or is responsible for paying, the funeral expenses.

What to do next

• Note the exact date of death and work out which due date applies.
• Find out whether the deceased or a spouse or partner carried on a business.
• Collect slips, statements, notices of assessment and account balances.
• Confirm your authority to act and send proof to the CRA when needed.
• Hire an accountant or lawyer if the estate is complex or a deadline has passed.

Frequently asked questions