Francesca Giroux, CPA
For the Lakeside Leader
Dealing with a death of a relative is always difficult, especially when it comes to dealing with their affairs. When an individual passes away there are a few steps you should tax immediately to help avoid future confusion. First of all, inform the Canada Revenue Agency (CRA) of the deceased’s date of death as soon as possible by calling 1-800-959-8281. In addition, Service Canada should be contacted as well at 1-800-622-6232.
The next step would be to identify the legal representative of the deceased person. This would be the individual named the executor of the will, or appointed as the administrator of the estate by a court. The legal representative has the following responsibilities under the Income Tax Act: filing all required returns, making sure all taxes owing are paid, letting the beneficiaries know which, if any, of the amounts they receive from the estate are taxable, and obtaining a clearance certificate to certify that all amounts owing to the CRA are paid. As the legal representative you can authorize another individual, such as your accountant, to deal with the CRA for tax matters on your behalf. Please contact your CGA to advise you on this process.
The final return of the taxpayer must report all of the deceased’s income from January 1 of the year of death, up to and including the date of death. In addition, all assets must be recorded as “sold” at the fair market value at the date of death, although there are certain rollover provisions. This includes items such as RRSP’s, rental properties, shares and the taxpayer’s principal residence. The final return is generally due on or before April 30 of the following year if the death occurred between January 1 and October 31. If the death occurred between November 1 and December 31 the return can be filed up to six months after the date of death.
Income that was earned after the date of death should be reported on a T3 Trust Income Tax and Information Return, such as the CPP death benefit, pension payments, refund of pension contributions, and severance pay received because of death. The changes in value of any of the assets reported as “sold” on the final return are also reported in the Trust return.
While the passing of a loved one is a difficult time it is important to handle their tax matters promptly. If you are the legal representative, contact your CGA if you require advice or assistance in preparing the necessary returns.
Please e-mail your questions to firstname.lastname@example.org.
Information provided is of a general nature. As each individual or company’s situation is unique, you may wish to consult with your CPA for information specific to your own needs.