Managing the final tax returns for someone who has died

Aceti & Associates - Monday, February 15, 2016

Managing the final tax returns for someone who has died

Coping with the death of a loved one is difficult. There are many things to keep in mind when you are managing the tax affairs of a deceased person. In general, the final individual income tax return of a deceased person is prepared and filed in the same manner as when they were alive. All income up to the date of death must be reported and all credits and deductions the person is entitled to may be claimed. You may also have to file any income tax returns for the years preceding the year of his or her death if the individual has not done so.

Important facts

Here are a few things to keep in mind when dealing with someone’s taxes after they have passed away.

  • File a final return – A final return must be filed after a death. The legal representative of the deceased must report all of the deceased’s income from January 1 of the year of death up to and including the date of death, and report income earned after the date of death on a T3 Trust Income Tax and Information Return. The legal representative of the deceased must sign the return.
  • Installments – If an individual who pays tax by installments dies during the year, installment payments due on or after the date of death do not have to be paid.
  • Consult your accountant for the types of income, deductions, and credits and what type of return each can (or must) be reported or claimed on.
  • Deemed disposition of property – The tax treatment of capital property can be complex. Consult your accountant for more information.

Information for legal representatives

  • Are you a legal representative? – You are a legal representative of a deceased person if you are named executor in the will, you are appointed as the administrator of the estate by a court, or you are the liquidator for an estate in Quebec.
  • Clearance certificate – As a legal representative, you may want to get a clearance certificate before you distribute any property under your control. A clearance certificate certifies that all the amounts the deceased owed to the CRA have been paid, or that we have accepted security for the payment.
* This reproduction is a copy of an official work that is published by the Government of Canada, the reproduction has not been produced in affiliation with, or with the endorsement of the Government of Canada.