T3 Estate Return in Ontario: When Executors Must File One

Once someone dies, their estate can keep earning money: interest on bank accounts, dividends, rent from a property, or gains when assets are sold. How that income is reported depends on your situation, so it is worth confirming with an accountant. It may belong on a separate return for the estate, called a T3.

If you are the executor (the estate trustee), this is one of the tax jobs that can surprise you. This article explains when a T3 is needed, what graduated rate estate status means, the main deadlines, and where the clearance certificate fits in. An accountant or lawyer can confirm how it applies to your estate.

What the T3 return is for

As the legal representative, the executor must file all required returns for the deceased, make sure any balance owing is paid before the estate is distributed, and confirm that all balances owing to the CRA are resolved. The final personal (T1) return and the T3 estate return have different due dates, which are set out below.

An estate must file a T3 if it has total income from all sources of more than $500. It must also file, even at $500 or less, if it makes a capital distribution to beneficiaries. These filing rules changed for trust tax years ending on or after December 31, 2023, so older advice you find online may be out of date.

Graduated rate estate status

A graduated rate estate (GRE) is a special tax status an estate can have for a limited time after death. An estate can be a GRE for no more than 36 months after the death. Because the status is time-limited, it is worth noting the end date and confirming with an accountant how your estate is taxed once it passes.

One practical effect is the year-end. A GRE may have a non-calendar tax year, while other trusts generally must use a December 31 year-end. Choosing a year-end can affect when the T3 and any tax are due, so it is worth discussing with an accountant before the first year closes.

Deadlines to keep straight

Executors often mix up the personal return and the estate return. They have different due dates.

Paying the executor and clearing the estate

If the estate pays executor, liquidator or trustee fees, it must file a T4 Summary and the related T4 slips. How those fees are reported depends on who receives them; an accountant can confirm the right slip.

Before the estate is distributed, consider a clearance certificate. It confirms that the estate has paid all amounts of income tax. If the legal representative distributes assets without one and tax is owing, they are personally liable for the unpaid amounts, up to the value of the assets distributed.

• Request the certificate on Form TX19 only after the required returns are filed and assessed and taxes are paid or secured; do not send it with the returns.
• The CRA acknowledges the request within 45 days, and the assessment can take up to 120 days.
• If the deceased had a GST/HST number, a separate Form GST352 is also needed.
• For a corporation being wound up or dissolved, a clearance certificate is also required before distributing corporate property.

What to do next

• List every source of income the estate earns after the date of death, and keep the statements.
• Note the date of death and work out the final T1 deadline, including whether a business extension may apply.
• Decide with an accountant whether the estate qualifies as a graduated rate estate and which year-end to use.
• Diarize the T3 due date (90 days after year-end) and the 36-month limit on GRE status.
• Hold back distributions until you understand the clearance certificate process and timing.
• Ask a lawyer or accountant about anything unusual, such as a business, foreign assets or a corporation.

Frequently asked questions