If you’re settling an estate, here is what has to be filed.
Losing someone comes with a pile of paperwork nobody warns you about. This is the tax side of it in plain English: what gets filed, when it is due, and how an executor stays protected. We have prepared estate and final returns in Burlington for over two decades.
Bring the folder as-is. We will tell you what is needed and what can wait.
The filings
There are usually two returns, sometimes three.
The final T1
The person's last personal return, everything they earned from January 1 to the date of death, plus the tax effects of death itself (see below). Due April 30 of the following year, or six months after death for deaths in November or December.
The T3 estate return
After death, the estate becomes its own taxpayer. Income the estate earns, interest, dividends, gains while assets wait to be distributed, goes on a T3 trust return, due 90 days after the estate's year-end.
Optional returns
In some situations a separate "rights or things" return can move certain income, declared-but-unpaid dividends, unpaid salary, onto its own return with its own credits, and lower the total tax. Worth checking; free money is rare and this is some of it.
The tax events at death
Why the final return is bigger than people expect.
- Deemed disposition: the CRA treats capital property, investments, the cottage, rental properties, as sold at fair market value on the date of death, even though nothing was sold. Unrealized gains land on the final return.
- RRSPs and RRIFs: the full value usually counts as income on the final return, often the biggest number on it. Spousal rollovers can defer this.
- The principal residence exemption can shelter the home, but only if the paperwork supports it, and only one property per family per year.
- Spousal transfers: most property can roll to a surviving spouse at cost, deferring the tax. Sometimes electing out for a specific asset saves more. This is where planning earns its keep.
Protecting the executor
Do not distribute without the clearance certificate.
A clearance certificate is the CRA's written confirmation that all tax owing has been paid. If the estate is distributed without one and the CRA later finds more tax owing, the executor can be personally liable. We prepare the request and deal with the CRA's questions so the certificate arrives and the executor sleeps.
Fair questions
What executors ask us first.
When is the final tax return due after someone dies?
If the person died between January 1 and October 31, the final return is due April 30 of the following year. If they died between November 1 and December 31, it’s due six months after the date of death. The estate's T3 return runs on its own year-end, due 90 days after.
What is a clearance certificate, and do I really need one?
It is the CRA's written confirmation that all taxes owing have been paid. If an executor distributes the estate without one and the CRA later finds more tax owing, the executor can be personally liable for it. For most estates it’s worth the wait.
Do investments and the cottage get taxed at death?
Generally, yes, the CRA treats capital property as if it were sold at fair market value on the date of death, so unrealized gains land on the final return. There are important exceptions, including transfers to a surviving spouse and the principal residence exemption, which is why timing and elections matter.
What happens to RRSPs and RRIFs?
Their full value is usually included as income on the final return, often the single biggest tax item at death. Naming a surviving spouse or a financially dependent child as beneficiary can defer that tax; the details depend on the situation.
You don’t have to figure this out alone.
Twenty minutes, free, no obligation. Bring your questions, or just the folder.
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