Rights or Things Return: Extra Final Return in Ontario

Many people die owed money for work already done: a last paycheque, vacation pay, a dividend that was declared but not yet received. If you are the estate trustee, you may wonder where that income should be reported.

The tax rules allow an optional separate return for these amounts, called the rights or things return. Used well, it can reduce the total tax the estate pays. This article explains what qualifies and how the deadlines work.

What 'rights or things' means

Under the Income Tax Act s. 70(2), the legal representative can elect to report the value of rights or things on a separate return instead of the final return. Rights or things are amounts that would have been income if the person had realized them during their life.

A final T1 Income Tax and Benefit Return must be filed for every person who dies. It reports income and property gains up to the date of death. The rights or things return is an extra return that lets certain unpaid amounts be reported separately rather than on that final return. The legal representative is usually the executor named in the will.

Examples of amounts that qualify

• Salary, commissions and vacation pay for pay periods that ended before death but were paid after it.
• OAS and CPP/QPP for the month of death paid after death.
• Dividends declared before death but not received.
• Matured bond coupons not yet cashed.
• Under specific conditions, accounts receivable, inventory, crops and livestock.

Only income earned but not received before death qualifies, and capital gains are excluded. Periodic amounts such as interest, rent or annuity payments are treated differently: they are deemed to accrue in equal daily amounts, and the part accrued to the date of death goes on the final return.

Why it can reduce tax

Filing optional returns can lower total tax because certain credits and deductions can be claimed more than once or split between returns, and each return starts again at the lowest tax brackets. For example, the federal rates in 2026 start at 14% on the first $58,523 of taxable income and rise to 33% above $258,482. Ontario rates apply in addition. Whether the election helps depends on the numbers, so run them with an accountant.

Bracket figures are only part of the picture, and they change each year, so a simple example is a rough guide at best. A real comparison looks at the actual amounts involved, the other income on the final return, and the credits available. That is why the work is best done with an accountant before you decide.

Deadline and the transfer exception

The rights or things return must be filed by the later of one year after the date of death and 90 days after CRA sends the Notice of Assessment or Reassessment for the final return. Any balance owing is due on the same date as for the final return.

There is an exception. If the legal representative transfers a right or thing to a beneficiary before the s. 70(2) election deadline, s. 70(2) does not apply to it. The beneficiary includes the amount in their own income when they receive it. That can sometimes spread the tax across more than one taxpayer, but it also means those amounts cannot go on the separate return.

For a death between January 1 and October 31, the final return and any balance owing are due April 30 of the year after the death. For a death between November 1 and December 31, they are due 6 months after the death.

There is an exception if the deceased or a cohabiting spouse or common-law partner ran a business. The final return is then due June 15 of the year after the death for deaths between January 1 and December 15, and 6 months after the death for deaths between December 16 and 31. Any balance owing must still be paid by the regular payment due date, and the later filing date does not apply if the business's expenditures were mainly for tax shelter investments.

A late return can bring a penalty of 5% of the balance owing, plus 1% for each full month it is late, up to 12 months, and compound daily interest on unpaid amounts.

What to do next

• List every amount owed to the deceased at death: pay, vacation pay, dividends, benefits, receivables.
• Separate income items from capital gains, which do not qualify.
• Note the date of death and diarize the one-year mark.
• Ask your accountant to compare tax with and without the separate return.
• Hold off transferring these items to beneficiaries until you have decided on the election.

Before you distribute estate property, remember that a legal representative must obtain a clearance certificate from the Minister, and one who distributes without it is personally liable for the unpaid amounts up to the value of the property distributed. The request is made after all returns have been filed and assessed, and not at the same time as the returns.

A lawyer or accountant can confirm whether a particular item qualifies in your situation.

Frequently asked questions