Filing taxes for deceased individuals

It isn't just the usual return

So you’ve been named as executor of an estate. What about the taxes?

As an executor/liquidator, you have several responsibilities. You must collect all assets, determine and pay all valid debts, then disburse the estate according to the terms of the will, or failing a will, the law. In respect to the taxes, the tax department will not authorize disbursement of the estate until the tax obligations are completed.

The following tax returns are common for an estate:

  • Payroll tax returns such as WSIB/CSST, EHT, T4, etc.
    Personal tax returns such as Terminal/Final, Rights and Things, etc.
    Trust or estate tax returns
    Each type of return has its own due date.

If the executor is paid by the estate, payroll taxes must be paid. This is similar to any employer’s payroll and is beyond the scope of this post.

In general, most estates will have up to two personal tax returns which are generally due on April 30 of the year following the death. The elective tax returns allow for significant tax advantages when compared to “normal” tax returns. For that reason, most tax software can not replace the knowledge base of an experienced person handling the tax situation.

An executor may also elect to also file an estate trust return. This is done when the taxes payable on the trust is less than alternatives to filing the trust. A trust return is due 90 days after the end of the trust year. The trust year may end at any point in the year up to one year from the date of death.

The tax department is generally unforgiving when a trustee misses a deadline. This includes cases where the executor is the spouse of the deceased. For that reason, every effort should be made to meet the deadline.

Once all the tax returns are filed, the executor may apply for release so that the estate may be disbursed. In general, an executor will find that this final tax step will be completed by early fall of the year following death. Attempting to disburse the estate without permission from the tax department will mean that the executor is personally liable for the taxes – attempting to short circuit this step is not suggested!

I have training for most estate tax returns seen within Canada including Quebec. Please contact me if you need my assistance.