- An estate needs a T3 return if it earns income after death or distributes property to beneficiaries.
- The T3 is due 90 days after the estate's tax year-end, and a graduated rate estate may choose a year-end up to one year after death.
- The T3 is separate from the final T1 return, which reports income up to the date of death.
When someone dies, the estate they leave behind becomes its own taxpayer for what happens next. If you are the executor, you may be surprised to learn that the final personal return is only one of the filings the Canada Revenue Agency (CRA) can expect from you.
This article explains when an estate has to file a T3 trust return, how the filing date is set, and how the T3 differs from the final T1 return. It is general information, not advice on your particular estate.
This article covers Canadian federal tax law, which applies in every province.
When an estate must file a T3
A T3 return is needed if the estate earns income after the date of death or distributes property to beneficiaries. Either event is enough on its own.
Income the estate earns after death includes pension, investment, business, farming and rental income, and the CRA lists earnings from investments held in a TFSA before death among these. That income is reported on the T3, not on the final T1.
There is one narrow exception. If the CPP/QPP death benefit is the estate's only income and no T3 is otherwise required, the beneficiary can report it on their own T1 for the year it was received.
How the T3 differs from the final T1
The two returns cover different periods and different people. Income earned up to the date of death goes on the final return, even if it is received after death, unless it is filed on an optional return.
| Point | Final T1 return | Estate T3 return |
|---|---|---|
| Whose income | The deceased, up to the date of death | The estate, after death |
| Triggered by | Every person who dies must have a final return | Post-death income or distributions to beneficiaries |
| Due date | Based on the date of death | 90 days after the trust's tax year-end |
The final return also picks up capital property treated as sold immediately before death at fair market value, with the taxable capital gain or loss calculated on Schedule 3 and reported on line 12700, even if the property is not sold. Income the estate earns later does not go there.
Setting the T3 year-end and due date
The T3 is due 90 days after the trust's tax year-end, or 90 days after final distribution if the trust ceases to exist. The year-end therefore drives everything.
A graduated rate estate may choose any year-end up to one year after the date of death. A testamentary trust that is not a graduated rate estate has a December 31 year-end. Graduated rate estate status ends 36 months after death.
Whether your estate qualifies as a graduated rate estate depends on its facts, so confirm this with an accountant or lawyer before choosing a year-end. Because the year-end sets when the T3 is due, it is worth deciding before the first post-death income arrives.
Late filing and other T3 points
A late T3 return carries an alternative penalty of $25 per day even where no balance is owing, with a minimum of $100 and a maximum of $2,500. Interest is compounded daily on unpaid amounts from the day after the due date until paid.
If a late filing was caused by circumstances beyond your control, the CRA may cancel penalties or interest through its cancel or waive process. A late final T1 with a balance owing has its own penalty of 5% of the balance plus 1% of the balance for each full month late, up to 12 months.
- If the estate donates to charity, the T3 donation claim is limited to 75% of the trust's net income, plus 25% of taxable capital gains and recaptured CCA from the gifted property.
- Donations cannot be carried forward from a final return to a T3.
- Before distributing property, the legal representative must obtain a clearance certificate, or risk personal liability up to the value distributed.
What to do next
- Confirm you have notified the CRA that you are the legal representative, with a death certificate and the document naming you as executor.
- List the income the estate has earned since death and any property you plan to distribute.
- Ask whether the estate is a graduated rate estate and pick a year-end deliberately.
- Calendar the T3 due date at 90 days after the chosen year-end.
- Gather the T3RET form and the information slips for the estate.
- Apply for a clearance certificate only after all returns are filed and assessed and amounts owing are paid or secured.
- Speak with a lawyer or accountant before distributing anything to beneficiaries.
Frequently asked questions
Does every estate have to file a T3?
No. A T3 is needed if the estate earns income after death or distributes property to beneficiaries. An estate with neither generally has no T3 to file, though the final T1 is still required.
When is the T3 return due?
It is due 90 days after the trust's tax year-end, or after final distribution if the trust ceases to exist. A graduated rate estate may pick a year-end up to one year after death.
Is the T3 due on April 30 like the final return?
Not necessarily. The final return's due date depends on the date of death, while the T3 is tied to the estate's year-end.
What happens if the T3 is filed late?
A late T3 carries an alternative penalty of $25 per day, with a minimum of $100 and a maximum of $2,500, even if nothing is owing. The CRA may cancel penalties in some situations beyond your control.
Sources
- CRA – Filing and payment due dates (someone who died) — canada.ca
- CRA – What returns you need to file — canada.ca
- CRA – Represent someone who died — canada.ca
- CRA – T4011 Preparing Returns for Deceased Persons (cancelled) — canada.ca
- CRA – Report income, transfers and dispositions — canada.ca
- CRA – Brochure: Doing taxes for someone who died — canada.ca
- CRA – Capital gains (someone who died) — canada.ca
- CRA – Donations and gifts (someone who died) — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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