What you need to know when filing taxes for a deceased person.
May 6, 2022
When a loved one passes away, they leave behind their final tax obligation, which needs to be managed by a legal representative. There are a few responsibilities the legal representative needs to execute to ensure that person’s file can be closed.
Firstly, before a loved one passes away, it’s recommended that they have an estate plan, including a last will and testament. This way, that person’s assets are legally protected, and they can leave their final wishes to a trusted person, trust or institution of their choosing, called the estate executor. Without having a will, a court will appoint an administrator to manage the deceased person’s estate, likely an immediate family member.
Being someone’s executor can take time and effort, as this person is required to close out the deceased person’s tax obligations, and to ensure all debts are paid off before distributing inheritances and other estates.
The executor’s role when it comes to taxes
The executor’s job is to inform the Canada Revenue Agency (CRA) (and/or Revenu Quebec) and Service Canada of that person’s passing and provide the official death certificate, in order to stop or transfer government benefits, credits or grants that they were entitled to. Before proceeding with any distribution of assets, the executor is advised to apply for a clearance certificate, which validates that all taxes owed to the government by the deceased person have been settled. If an executor distributes assets without a clearance certificate, they'll be personally liable for all taxes owed by the deceased up to the amount distributed.
Preparing the final return
Following receiving the clearance certificate, the executor can prepare the deceased person’s final return, and this filing includes all the usual income received prior to death: T4s for employment income, T4A statements from pensions or retirement sources, T4E slips if they received employment insurance or pandemic benefit payments, and T5 statements from investment income. Note that there might be additional returns needed, including the T3 return for the estate, and possibly elective returns, so confirming with an expert is recommended.
Timelines for filing the return
If the person’s death occurred between January 1 to October 31, the due date for the final return is April 30 of the following year. If the person passed away between November 1 to December 31, the due date is 6 months after the date of death.
There are some common questions people ask regarding filing for a deceased loved one, so we’ve compiled some quick answers to those questions.
- Funeral expenses, probate fees and fees to administer the estate are personal expenses and can’t be deducted.
- A death benefit (other than the CPP/QPP death benefit) of up to $10,000 is not taxable.
- Unless there is a surviving spouse, after a person’s death, any investments held in a tax-free savings account (TFSA) are no longer considered tax-free to the beneficiaries in the year they receive this income.
- The GST/HST credit payments paid for a period after the person died need to be repaid to the CRA.
Ready to file? H&R Block can help you navigate filing the taxes of a loved one. Choose from one of four convenient ways to file: File in an Office, Drop-off at an Office, Remote Tax Expert, or Do It Yourself Tax Software. And if you’re looking to create your Last Will and Testament, or arrange your Online Estate Planning, H&R Block can help with that too.