- Debts of the deceased are paid from the estate before any gifts in the will go to beneficiaries.
- When an estate cannot pay everyone, the province sets a priority order that starts with secured creditors and funeral and testamentary expenses.
- An executor who distributes assets before a CRA clearance certificate can be held personally liable if tax is still owing.
If you are an executor and the money in the estate looks smaller than the bills, the order in which you pay matters. Paying the wrong person first can create problems for you personally.
This article sets out the priority order Saskatchewan guidance gives for an insolvent estate, plus the practical steps around creditors and taxes. If funds are short, a lawyer can help you apply it to your facts.
This article covers the law of Saskatchewan.
Debts come before gifts
Debts of the deceased are paid from the estate, and they must be paid before any gifts in the will go to beneficiaries. Beneficiaries receive what is left after debts and expenses, not before.
Paying debts is one of the executor's common duties, along with securing and valuing assets, publishing a Notice to Creditors, depositing money in an estate account and paying debts by priority.
The order of priority
Where an estate is insolvent, meaning there is not enough to pay everything, the province gives this order:
| Priority | Type of claim |
|---|---|
| 1 | Secured creditors, up to the value of the security |
| 2 | Reasonable funeral and testamentary expenses |
| 3 | Costs of administration, including executor fees |
| 4 | Debts with legislative priority, such as child maintenance, landlord rent, unpaid wages and certain Income Tax Act and Bankruptcy and Insolvency Act debts |
| 5 | Other unsecured debts, paid ratably if funds are insufficient |
Paid ratably means each unsecured creditor receives a proportional share rather than being paid in full one at a time.
Finding creditors and protecting yourself
A Notice to Creditors (Form 16-48) should be published under section 32 of The Administration of Estates Act once a week for two consecutive weeks in a newspaper nearest the deceased's last residence. The executor should also run a personal property lien search and a judgment registry search.
For insolvent estates, the province recommends consulting a lawyer and, if needed, applying to the court for directions. The executor's disbursements and out-of-pocket expenses are paid by the estate, and the court can review them.
Taxes and personal liability
Income tax is part of the picture. Final return due dates depend on when death occurs: for death between January 1 and October 31 it is April 30 of the following year, and for death between November 1 and December 31 it is six months after death, with payment due on the same date. If the person who died or their spouse ran a business, the filing date may instead be June 15 of the following year (for death between January 1 and December 15), but payment is still due on the regular date. Late filing with a balance owing attracts a penalty of 5% plus 1% per full month up to 12 months.
On death a person is considered to have sold all their property just before death at fair market value, and any capital gain or loss is reported on Schedule 3 of the final return. This is a federal income tax, not an inheritance tax. Property passed to a surviving Canadian-resident spouse or common-law partner, if it vests within 36 months, may not result in a gain or loss on the final return, and the legal representative can elect out of that treatment. Gains on a principal residence may be wholly or partly exempt, but the residence must be designated using Schedule 3 and Form T1255. If a legal representative distributes assets before getting a CRA clearance certificate and tax is still owing, they can be held personally liable up to the value of the assets distributed.
What to do next
- List every asset and every known debt, and note which debts are secured.
- Keep funeral and administration receipts.
- Publish the Notice to Creditors and complete the lien and judgment searches.
- Hold off on paying beneficiaries until debts and taxes are sorted out.
- File the returns and request the CRA clearance certificate before final distribution.
- If it looks like the estate cannot pay everyone, speak with a lawyer before paying anyone.
Frequently asked questions
Do funeral costs come before other debts?
In an insolvent estate, reasonable funeral and testamentary expenses rank second, after secured creditors up to the value of their security.
Can I take my executor fees first?
Costs of administration, including executor fees, rank third in the insolvent estate order. Expenses you pay out of pocket are paid by the estate and the court can review them.
Do beneficiaries get paid before creditors?
No. Debts must be paid before any gifts in the will go to beneficiaries.
Can I be personally responsible for the deceased's taxes?
Possibly. If you distribute assets before a CRA clearance certificate and tax is still owing, you can be held personally liable up to the value of the assets distributed.
Sources
- Government of Saskatchewan – Executor or administrator duties — saskatchewan.ca
- Government of Saskatchewan – Creditors, debts and expenses — saskatchewan.ca
- Canada Revenue Agency – Clearance certificate — canada.ca
- Canada Revenue Agency – Filing and payment due dates (someone who died) — canada.ca
- Canada Revenue Agency – Capital gains (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
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