How to file taxes for a deceased person.
February 12, 2019
The untimely death of a family member can lead to a daunting and emotional phase for family members and relatives to endure. Estate planning is an important part of proper tax planning, to ensure your wishes are met and your expenses are covered and managed. And to our readers out there searching for this information in a time of sadness, our deepest sympathies for your loss.
Unfortunately, the obligation of tax filing is inevitable even after death, when taxes need to be settled one final time, and there could be many questions that arise, as this is a unique time when someone needs to consider filing on behalf of another person no longer with us. So, we have mapped out some considerations for this type of planning.
Appointing a legal representative for a deceased person is an important first step.
First and foremost, it is important to determine if an executor or estate administrator has been appointed for a potential deceased member. An executor is a legal representative, generally in the capacity of an individual, trust or institution whose name has been included in a will. An executor is solicited by a court, to oversee the final settlement of the deceased's estate. If the taxpayer died without a will, a court will appoint an administrator to manage the deceased member’s estate. The court appointed administrator can either be the spouse, common-law partner, or the next of kin (blood relative) of the deceased. It’s also important that the executor has knowledge and access to the deceased’s accounts and the passwords as deemed necessary.
Notifying the government authorities is a must-do.
The executor will have to contact Canada Revenue Agency (CRA) and Service Canada and notify both entities about the event by providing the death certificate. This is a crucial step as the deceased member could have been a recipient of government benefits, credits, grants etc. These payments need to either be stopped or transferred immediately to the survivor of the deceased member as ‘survivor benefits’. Other benefits may include GST/HST credit payments, the Canada Child Benefit, etc. In cases of senior deceased individuals, Service Canada must be contacted to stop any Old Age Security Pension payments and / or Canadian Pension Plan payments on file.
Obtain a CRA Clearance Certificate before distributing assets in the will.
It’s crucial to obtain a clearance certificate before the distribution of any property or asset of the deceased as per the will. A clearance certificate validates that all dues owed by the deceased to the government have been settled, or a security for the payment has been submitted in full. If an executor distributes the assets of the estate without a clearance certificate, they will be personally liable for all taxes owed by the deceased. These dues will be equivalent to the degree of the value of the assets distributed. The clearance certificate will list all tax years and amounts cleared or pending to the date of death. If there is a trust involved in the will, a separate clearance certificate is required.
Once all this is done, the executor can prepare the deceased’s final return.
The executor will have to track the deceased’s income from all sources, from January 1st of the year of death up to the date of death. This will involve backtracking old tax returns, and establishing contact with employers, trust companies and other financial institutions such as stock brokers, education, pension managers, etc. The executor will have to consolidate previous information slips, receipts and any other documentation necessary to validate or estimate incomes and deductions.
Deadlines for deceased person tax filing.
The deadline for filing the final tax return will depend on the date of death. If the death occurred between January 1st and October 31st, the final tax return filing deadline is April 30th of the following year. If the death occurred between November 1st and December 31st, the final tax filing return deadline is six months following the date of death.
It’s important to note that more than one return might be needed – the final return, the T3 return for the estate, and possibly elective returns as well, so speaking with an expert in this area is going to be the best bet in insuring things are done accurately.
If you have questions on how to prepare your last will and testament, power of attorney and living will, or filing for a deceased person, an H&R block Tax Expert is here to help. Visit an office near you or you can buy your estate plan online or at any local H&R Block office.