- A T3 return reports income earned by the estate after death, separate from the deceased's final personal return.
- Not every estate has to file one, because an estate distributed right after death or with no income may be exempt.
- A T3 is generally due 90 days after the estate's tax year-end, and a graduated rate estate can choose its year-end.
Once someone dies, their assets often keep earning money: interest, dividends, rent or investment gains. That income no longer belongs to the deceased, so it is not reported on their final personal return. The executor has to deal with it in a different way.
Income the estate earns after the death may have to be reported on a T3 Trust Income Tax and Information Return. This article explains what the T3 is, when an estate has to file one, what a graduated rate estate is, and what to do if you are unsure.
This article covers the law of British Columbia.
What the T3 return is for
The deceased's final personal return reports income from January 1 of the year of death up to the date of death. Income earned by the estate after death may have to be reported on a T3 Trust Income Tax and Information Return.
The legal representative, who is typically the executor named in the will, is the person responsible for filing the final return and for filing T3 returns if they are required.
When an estate must file a T3
An income-receiving trust must file a T3 if it meets any one of the following tests.
- Total income from all sources of more than $500.
- Income of more than $100 allocated to any single beneficiary.
- A capital distribution to a beneficiary.
- Income allocated to a non-resident beneficiary.
An express trust resident in Canada that is not a listed trust must file every year, even with no income.
There is an exception. An estate may not need to file a T3 if it is distributed immediately after death or earned no income before distribution. Beneficiaries then get a statement of their share, and some post-death income, such as the CPP/QPP death benefit, can be reported on the beneficiary's return instead.
Graduated rate estate status
A graduated rate estate (GRE) is a particular kind of estate. To qualify, it must arise on death, exist no more than 36 months after the death, and be a testamentary trust. It must also provide the deceased's SIN on its T3 returns, and it must designate itself as the GRE on its T3, with no other estate doing so.
GRE status lasts up to 36 months. Whether the status helps your particular estate depends on its income and how long administration takes, so an accountant can confirm this.
A GRE may use a tax year-end that is not December 31, with a deemed year-end no later than 36 months after death. Most other trusts have a December 31 year-end.
Deadlines and late filing
| Item | Rule |
|---|---|
| T3 filing deadline | No later than 90 days after the trust's tax year-end |
| Balance owing | Also due within 90 days |
| Deadline on a weekend or holiday | The next business day counts as on time |
| Final T3 when the trust ends | Due 90 days after the end date; for a GRE, that is the final distribution of its assets |
Failing to file a required T3 may lead to a late-filing penalty, and interest and penalties may apply to unpaid amounts.
What to do next
- Make a list of all income the estate has earned since the date of death.
- Note whether any assets have already been distributed to beneficiaries.
- Decide with an accountant whether the estate meets a filing test and whether to designate it as a GRE.
- Choose a year-end if the estate is eligible for one, and diarize the 90-day deadline.
- Keep the deceased's SIN and the estate records together for the T3.
Estates that hold investments, rental property or a business for any length of time are rarely simple. A lawyer or accountant can confirm your obligations before the first deadline arrives.
Frequently asked questions
Does every estate have to file a T3?
No. An estate may not need to file if it is distributed immediately after death or earned no income before distribution. If it meets one of the income, allocation or distribution tests, it must file.
How long does graduated rate estate status last?
It lasts up to 36 months from the death. After that the estate no longer qualifies as a GRE.
When is the T3 due?
It is due no later than 90 days after the trust's tax year-end, and any balance owing is due within 90 days as well. If the 90th day falls on a weekend or holiday, the next business day counts as on time.
Is estate income reported on the deceased's final return?
Generally no. The final return covers income up to the date of death, and income the estate earns afterward may have to be reported on a T3.
Sources
- CRA – Represent someone who died — canada.ca
- CRA – How to manage the taxes of someone who has died (archived tax tip) — canada.ca
- CRA – T3: When to file — canada.ca
- CRA – T3: Who should file — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
This is a wills & estates question
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