Which Tax Returns Must a Saskatchewan Executor File, and When?

Taxes are one of the less visible parts of an executor's job. The will and the court application get most of the attention, but the Canada Revenue Agency (CRA) has its own deadlines, and they run from the date of death, not from the date Letters are granted.

This article walks through the returns an executor in Saskatchewan usually deals with, when each is due, and why the CRA clearance certificate is the last gate before the estate is paid out. It is general information. Every estate is different, so a lawyer or accountant can confirm what applies to yours.

This article covers the law of Saskatchewan.

Where taxes fit in an executor's duties

The province's list of common executor duties includes filing returns and obtaining a CRA Final Clearance Certificate, and it places that step after publishing a Notice to Creditors and before paying debts by priority and accounting to beneficiaries within two years. In practice, tax work runs alongside the rest of the administration.

There are usually two returns to think about: the deceased's final personal (T1) return, and a T3 trust return for income the estate earns after death. How these apply to your situation depends on the facts, so it is worth confirming with a lawyer or accountant.

The final return and its due dates

The due date depends on when the person died. The payment date is the same as the filing date.

If the return is filed late and a balance is owing, the penalty is 5% plus 1% for each full month, up to 12 months. That is a good reason to start gathering slips and statements early, even if the estate itself is still being sorted out.

What goes on the final return

On death, the person is treated as having sold all of their property just before death at fair market value. Any capital gain or loss is reported on Schedule 3 of the final return. This is a federal income tax on the deceased's gains, not an inheritance tax.

• Spouse rollover: property passed to a surviving Canadian-resident spouse or common-law partner, and vested within 36 months, may not result in a gain or loss on the final return, and the legal representative can elect out.
• Principal residence: gains may be wholly or partly exempt, but the home must be designated using Schedule 3 and Form T1255.
• RRSP or RRIF: the fair market value of an unmatured RRSP at death is included in the deceased's income, on line 12900 for an RRSP and line 13000 for a RRIF.
• RRSP to a spouse: if it is transferred to the spouse's RRSP by the end of the year after death, the amount is not included in the final return. The spouse reports it and deducts the transfer.
• Drop in value: a decline in value after death can be deducted if the plan is fully paid out by the end of the following year, using Form RC249.

Valuations, designations and elections can change the tax bill a great deal. This is where an accountant's help is often worth arranging before the return is filed.

The T3 return for the estate

Income the estate earns after the date of death, such as interest or investment income while assets are held, is reported on a T3 trust return, not on the final T1. A graduated rate estate can choose any year-end up to one year after death.

The T3 return is due 90 days after the estate's year-end. Choosing the year-end is therefore a planning decision, because it sets the T3 deadline. Keep the estate account (the one the province's executor list says to open) clean, so interest and payments are easy to trace.

The clearance certificate and what to do next

The clearance certificate is the CRA document an executor needs before the estate is finally distributed. Form TX19 requests it, but only after the returns are filed, notices of assessment are received and any tax is paid. Assessment can take up to 120 days.

This matters because an executor who distributes assets before getting the certificate, when tax is still owing, can be held personally liable up to the value of the assets distributed. Final distribution cannot take place until the certificate is received. Some distributions may also be delayed six months after Letters are obtained if a dependant may claim or a spouse may apply for division of family property.

• Note the date of death and work out which filing date applies.
• Find out whether the deceased or their spouse ran a business.
• Gather income slips, RRSP or RRIF statements and property records.
• Get valuations for property that may trigger a capital gain.
• Decide with an accountant whether to use the spouse rollover and which property to designate as a principal residence.
• Choose the estate's T3 year-end and diarize the 90-day deadline.
• File returns, wait for assessments, pay any tax, then request the TX19 clearance certificate.
• Hold back enough in the estate until clearance arrives, and keep records for your accounting to beneficiaries.

Frequently asked questions