“In this world nothing can be said to be certain, except death and taxes,” Benjamin Franklin once said. But even leaving this world for the next doesn’t mean taxes can be escaped. A person who has just died still has to pay taxes on what they have left behind.
As the deceased cannot pay the taxes, their legal representative must pay them from the assets of the deceased’s estate. The executor of the estate, or a court-appointed administrator if the deceased dies intestate, must calculate, file a final tax return, and then pay any outstanding taxes to the government.
The legal representative first notifies the Canada Revenue Agency and Service Canada of the date of the deceased’s death. If the deceased passed away between January 1 and October 31, the deadline for paying the taxes is April 30 of the following year. If the deceased dies in November or December, the taxes are due six months after the date of death.
- The person’s income up to and including the date of death
- The value of any financial assets such as mutual funds and other investments, as they are deemed to have been sold for their value on the date of death
- Any income earned after the date of death
Government benefit cheques such as pensions, child benefits, and GST/HST credits must be returned.
When all this information has been compiled, the legal representative must prepare and file a final tax return for the estate. The legal representative may also file one or more of three optional returns that can reduce the tax the deceased has to pay.
When the CRA is satisfied all taxes owing have been paid, it can issue a clearance certificate. This certifies that the estate has paid all its taxes. The legal representative can then distribute the estate’s assets without risking being responsible for any taxes that the deceased might have owed the CRA.
Acting as a legal representative for a deceased’s estate can a challenging task. It is wise to consult an experienced estate lawyer for guidance about paying the deceased’s taxes.