- The main tax on death arises through the final return, where the deceased is treated as having sold their capital property just before death.
- Income the estate earns after death may be reported on a separate T3 trust return, and BC probate fees are charged under the Probate Fee Act.
- Applying for a clearance certificate before distributing assets can protect the legal representative from personal liability for tax.
If you have been named executor in British Columbia, you may be wondering what the estate actually owes and to whom. There is no single bill. Several different taxes and fees can apply, each with its own form, deadline and person responsible.
This article gives you the overview: the final return, the estate's own T3 return, capital gains, registered plans, and BC probate fees. Your situation may differ, so use this as a map and confirm details with a lawyer or accountant.
This article covers the law of British Columbia.
The big picture
On death, one main way tax arises is through the deceased person's final income tax return. The deceased is treated as having disposed of each capital property immediately before death at its fair market value. The CRA describes this as being considered to have sold everything just before death, even though no sale happens.
The legal representative is usually the executor named in the will. That person files the final return, files any earlier returns that were missed, and files T3 returns if required.
| Item | What it is | Who deals with it |
|---|---|---|
| Final (T1) return | Income from January 1 to the date of death | Legal representative |
| T3 trust return | Income the estate earns after death, if required | Legal representative |
| Capital gains | Gain on deemed sale of property at death | Reported on the final return |
| Probate fee | Charged under the BC Probate Fee Act and calculated on the gross value of the estate | Depends on the estate, so confirm with a lawyer |
The final return and estate returns
The final return reports all of the deceased's income from January 1 of the year of death up to the date of death. Income the estate earns after death may have to be reported on a T3 Trust Income Tax and Information Return.
An income-receiving trust must file a T3 if it has total income of more than $500, income of more than $100 allocated to any single beneficiary, a capital distribution to a beneficiary, or income allocated to a non-resident beneficiary; an express trust resident in Canada (not a listed trust) must file every year even with no income. An estate may not need to file if it is distributed immediately after death or earned no income before distribution. Whether your estate falls into one group or the other is worth confirming with a lawyer or accountant.
A T3 return and any balance owing are due within 90 days after the trust's tax year-end. A graduated rate estate can use a non-calendar year-end, with a deemed year-end no later than 36 months after death.
Capital gains and registered plans
The gain on each capital property is its fair market value less its adjusted cost base, reported on Schedule 3, and the taxable portion goes into income on line 12700 of the final return. A spouse or common-law partner rollover can defer this where property passes to them.
An unmatured RRSP is generally included in the deceased's income for the year of death, unless it passes tax-deferred to a qualifying beneficiary. A RRIF works in a similar way unless a spousal rollover applies.
- Your home may still need to be designated as a principal residence on the final return, even if the whole gain is exempt.
- Rental property and vacant land are not treated as a principal residence.
- A cottage used for personal enjoyment is personal-use property, and a loss on it cannot be claimed.
BC probate fees
No probate fee is payable if the estate is worth $25,000 or less. Above that, the fee is $6 for every $1,000 or part of $1,000 over $25,000, plus $14 for every $1,000 or part of $1,000 over $50,000.
The fee is based on the gross value of the estate in the Statement of Assets, Liabilities and Distribution. BC real and tangible personal property is always included, while intangible property is included only if the deceased was ordinarily resident in BC immediately before death. If an asset was omitted or undervalued, the personal representative must disclose it and pay the difference. Fees can change, so confirm the current rules before you file.
Protecting yourself as executor
A clearance certificate confirms the estate has paid the income tax and GST/HST, interest and penalties it owed, or that the Minister has accepted security. If you distribute assets without one and tax is owing, you can be held personally liable, up to the value of the assets distributed.
Other BC items can come up too. Property transfer tax may be exempt when property moves to a personal representative, and the speculation and vacancy tax has special exemptions after a death.
What to do next
- Notify the CRA and Service Canada of the death as soon as possible.
- List the assets at death and their fair market values.
- Note the final return due date and calendar it.
- Check whether the estate will need a T3 return.
- Ask a lawyer or accountant before distributing assets, and apply for a clearance certificate.
Frequently asked questions
Is there an inheritance tax in British Columbia?
Tax on death generally arises through the deemed disposition of property and the final return. BC separately charges probate fees under the Probate Fee Act. A lawyer or accountant can confirm how this applies to a specific estate.
Who pays the tax, the estate or the beneficiaries?
The legal representative files the returns. Some post-death income may be reported on a beneficiary's return instead, such as the CPP/QPP death benefit. Who bears each tax can depend on the will and the facts, so it is worth confirming with a lawyer or accountant.
Does every estate pay probate fees?
No probate fee is payable if the estate is worth $25,000 or less. There is also no fee on a grant de bonis non, a cessate grant, or a double probate.
Can I be personally responsible for the estate's taxes?
Yes, if you distribute assets without a clearance certificate and tax is owing, you can be held personally liable up to the value of the assets distributed. A clearance certificate is requested on Form TX19.
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 – Filing and payment due dates (someone who died) — canada.ca
- CRA – Notify the CRA of a date of death — canada.ca
- Income Tax Act, s. 70 — Justice Laws (federal)
- CRA – Deemed disposition of property — canada.ca
- CRA – Capital gains (someone who died) — canada.ca
- CRA – RRSP (someone who died) — 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
A single will with us is from $894.88, tax included. Third-party fees are extra.