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Questions and answers about What to do when someone has died

Can I deduct funeral expenses, probate fees, or fees to administer the estate?
No. These are personal expenses and cannot be deducted.
Who reports a death benefit that an employer pays?
That depends on who received the death benefit. A death benefit is income of either the estate or the beneficiary who receives it. Up to $10,000 of the total of all death benefits paid (other than CPP or QPP death benefits) is not taxable. If the beneficiary received the death benefit, see line 130 in the General Income Tax and Benefit Guide. If the estate received the death benefit, see the T4013, T3 - Trust guide.
On what return do I report Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) death benefits for the estate of the deceased?
A CPP or QPP death benefit can be reported either on the tax return of the recipient beneficiary of the deceased person's estate, or on a T3 Trust Income Tax and Information Return, for the estate of the deceased. If the estate then pays the death benefit to the beneficiary, a T3 slip will be issued in the beneficiary's name. The amount of the CPP or QPP death benefit is shown in box 18 of Form T4A(P), Statement of Canada Pension Plan Benefits. Do not report this amount on the return for the deceased person. Unlike a death benefit that an employer may pay to the estate or to a named beneficiary, this benefit is not eligible for the $10,000 death benefit exemption. You have to report all other CPP or QPP benefits on the deceased's return. For more information see line 114 - CPP or QPP benefits.
Who reports amounts an employer pays for vacation and unused sick leave?
Vacation pay is income of the deceased person and can be reported on a return for rights or things. Payment for unused sick leave is considered a death benefit and is income
of the estate or beneficiary who receives it. For more information, see
IT508, Death Benefits.
The deceased had investments in a tax-free savings account (TFSA). Who reports any income earned in the TFSA?
When the holder of a deposit or an annuity contract under a TFSA dies, the holder is considered to have received, immediately before death, an amount equal to the fair market value (FMV) of all the property held in the TFSA at the time of death. As a result, no income should be reported by the deceased on the final return or any optional returns. After the holder's death, the annuity contract is no longer considered a TFSA and all earnings after the holder's death are taxable to the beneficiaries in the year they receive this income. For more information, see Guide RC4466, Tax-Free Savings Account (TFSA), Guide for Individuals.
If the deceased person was paying tax by instalments, do I have to continue making those instalment payments?
No. The only instalments we require are those that were due before the date of death but not paid.
Why do I have to return the deceased person's GST/HST credit?
Since the payments are an advance on purchases for the current calendar year, you have to return GST/HST credit payments that were paid to the deceased after their death. If the deceased was single and the estate is entitled to the payment, another payment will be issued to the estate. However, the payment that was issued to the deceased person must be returned to us before we reissue the payment to the estate. For more information, see GST/HST credit.
Source : Canada Revenu
Definitions for What to do when someone has died
Adjusted cost base (ACB)
This is usually the cost of a property, plus any expenses to acquire it, such as commissions and legal fees.
The cost of a capital property is its actual or deemed cost, depending on the type of property and how you acquired it. It also includes capital expenditures, such as the cost of additions and improvements to the property. You cannot add current expenses, such as maintenance and repair costs, to the ACB of a property.
For more information on ACB, see Interpretation Bulletin
IT456, Capital Property - Some Adjustments to Cost Base, and its Special Release.
If the deceased filed
Form T664 or T664 (Seniors), Election to Report a Capital Gain on Property Owned at the End of February 22, 1994, the ACB of the property may change. For more information, see Guide T4037, Capital Gains.
Administrator
There may not be a will, or the will may not name an executor. In this case, a court will appoint an administrator to handle the deceased's estate. An administrator is often the spouse, common-law partner, or the next of kin.
Advantage
See Eligible amount of the gift.
Annuitant
Generally, an annuitant is the person for whom a retirement plan provides a retirement income. In certain circumstances, the surviving spouse or common-law partner may qualify as the annuitant when, because of the death, he or she becomes entitled to receive benefits out of the retirement plan.
Annuity payment
This is a fixed periodic payment that a person has the right to receive, either for life or for a specific number of years. These payments represent a partial recovery of financing and a return (interest) on the capital investment.
Arm's length transaction
Generally refers to a transaction between persons acting in their separate interests. An arm’s length transaction is generally a transaction that reflects ordinary commercial dealings between parties acting in their own interests.

“Related persons” are not considered to deal with each other at arm’s length. For example individuals connected by blood relationship, marriage or common law partnership or adoption, are related persons. A corporation and another person or two corporations may also be related persons.

“Unrelated persons” may not be dealing with each other at arm’s length at a particular time. Each case will depend upon its own facts. The following factors are useful criteria that will be considered in determining whether parties are not dealing at arm’s length:
  • the existence of a common mind which directs the bargaining for both parties to a transaction;
  • the parties to a transaction are “acting in concert” without separate interests; “acting in concert” means, for example, a group acting with considerable interdependence in transactions involving a common purpose; or
  • the existence of control of one party by the other by way of, for example, advantage, authority or influence.
For more information, see Income Tax Folio S1-F5-C1, Related persons and dealing at arm's length.
Capital cost allowance (CCA)
In the year you buy a depreciable property, such as a building, you cannot deduct the full cost. However, since this type of property wears out or becomes obsolete over time, you can deduct its capital cost over a period of several years. This deduction is called CCA. You cannot claim it for the fiscal period that ends on the date of death.
When we talk about CCA, a reference is often made to
class. You usually group depreciable properties into classes. You have to base your CCA claim on the rate assigned to each class of property.
Capital property
This includes depreciable property, and any property that, if sold, would result in a capital gain or a capital loss. You usually buy it for investment purposes or to earn income. Capital property does not include the trading assets of a business, such as inventory. Some common types of capital property include cottages, securities such as stocks, bonds, and units of a mutual fund trust, and land, buildings, and equipment used in a business or rental operation.
Common-law partner
This applies to a person who is not your spouse, with whom you are living in a conjugal relationship, and to whom at least one of the following situations applies. He or she:
  1. has been living with you in a conjugal elationship, and this current relationship has lasted at least 12 continuous months; Note
    In this definition, 12 continuous months includes any period that you were living separate and apart for less than 90 days because of a breakdown in the relationship.
  2. is the parent of your child by birth or adoption; or
  3. has custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent on that person for support.
Deemed disposition
This expression is used when a person is considered to have disposed of a property, even though a sale did not take place.
Deemed proceeds of disposition
This is an expression used when a person is considered to have received an amount for the disposition of property, even though the person did not actually receive that amount.
Depreciable property
This is usually capital property used to earn income from a business or property. The capital cost can be written off as CCA over a number of years.
Eligible amount of the gift
This is generally the amount by which the fair market value of the gifted property exceeds the amount of the advantage, if any, received for the gift.
The
advantage is generally the total value of all property, services, compensation, or other benefits to which you are entitled as partial consideration for, or in gratitude for, the gift. The advantage may be contingent or receivable in the future, and given either to you or a person not dealing at arm's length with you.
The advantage also includes any limited-recourse debt in respect of the gift at the time it was made. For example, there may be a limited-recourse debt if the property was acquired as part of a gifting arrangement that is a tax shelter . In this case, the eligible amount of the gift will be reported in
box 13 of Form T5003, Statement of Tax Shelter Information. For more information on tax shelters and gifting arrangements, see Guide T4068, Guide for the Partnership Information Return (T5013 forms)
Eligible individual
An eligible individual is a child or grandchild of a deceased annuitant under an RRSP, or a RRIF, or of a deceased member of a registered pension plan, who was financially dependent on the deceased for support at the time of the deceased's death, because of an impairment in physical or mental function.
Executor
This is an individual or trust institution named in a will and confirmed by a court to settle the deceased's estate.
Fair market value (FMV)
This is usually the highest dollar value that you can get for your property in an open and unrestricted market between a willing buyer and a willing seller who are acting independently of each other.
Liquidator
In Quebec, the liquidator is responsible for distributing assets of all estates. For estates with a will, the liquidator's role is similar to an executor's. For estates without a will, the liquidator acts as the administrator of the estate.
Locked-in
This means that the beneficiary who is to receive the property has a right to absolute ownership of it. No future event or development can take this right away. In order for a property to be locked-in:
  • for a spousal or common-law partner trust, it has to become locked-in before the surviving spouse or common-law partner dies; and
  • for an individual, it has to become locked-in before the individual dies.
Non-arm's length transaction
This refers to a transaction between parties that are not dealing with each other at arm's length at the time of the transaction.
Qualified donees
Qualified donees are as follows:
  • registered charities;
  • registered Canadian amateur athletic associations;
  • registered national arts service organizations;
  • registered housing corporations resident in Canada set up only to provide low-cost housing for the aged;
  • registered municipalities in Canada;
  • registered municipal or public bodies performing a function of government in Canada;
  • the United Nations and its agencies;
  • registered universities outside Canada that are prescribed to be universities the student body of which ordinarily includes students from Canada;
  • Her Majesty in Right of Canada, or a province, or a territory;
  • registerd foreign charitable organizations to which Her Majesty in right of Canada has made a gift.
Specified RDSP payment
A specified RDSP payment is a payment that:
Spouse
This is a person to whom you are legally married.
Testamentary spousal or common-law partner trust
This is a trust created by the deceased's will, or a court order in relation to the deceased's estate made under any law of a province or territory that provides for the relief or support of dependants. The surviving spouse or common-law partner is entitled to all the income of the trust that arises before he or she dies. No one else can receive or use the trust's income or capital before the surviving spouse's or common-law partner's death.
For more information, see
IT305, Testamentary Spouse Trusts.
Testamentary debts
These are debts or liabilities of all kinds that an individual incurred and did not pay before death. It also includes amounts payable by the estate because of death.
Undepreciated capital cost (UCC)
Generally, UCC is equal to the total capital cost of all the properties of a class minus any capital cost allowance claimed in previous years. When property of the class is disposed of, you also have to subtract from the UCC one of the following two amounts, whichever is less:
  • the proceeds of disposition of the property (either actual or deemed) minus the related outlays and expenses to sell it; or
  • the capital cost of the property.
Legal representative
You are the legal representative of a deceased person if:
  • you are named as the 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.

Notes
As the legal representative, you may wish to appoint an authorized representative to deal with us for tax matters on your behalf. You may do so by completing and mailing (do not faxForm T1013, Authorizing or Cancelling a Representative.
Unless included in your business income, trustee, executor, or liquidator fees paid to you for acting as an executor is income from an office or employment. As the executor, you must report these fees on a T4 slip. For more information see "Employment by a Trustee" in Chapter 1 of the
T4001, Employer's Guide - Payroll Deductions and Remittances.
As the legal representative, you should provide us with the deceased's
date of death as soon as possible. You can advise us by calling 1-800-959-8281, by sending us a letter or a completed Request for the Canada Revenue Agency to Update Records form. This form is included with our Information Sheet RC4111, Canada Revenue Agency - What to Do Following a Death.
To keep our records up to date, also send us the following information:
  • a copy of the death certificate; and
  • a complete copy of the will or other legal document such as a grant of probate or letters of administration showing that you are the legal representative.
You must provide the deceased individual's social insurance number with any request you are making or with any information that you are sending to us.
Include this information with the
final return if you did not send it right after the deceased's death.

Note
You should also advise Service Canada of the deceased's date of death.
Under the
Income Tax Act, as the legal representative, it is your responsibility to:
  • file all required returns for the deceased;
  • ensure that all taxes owing are paid; and
  • let the beneficiaries know which of the amounts they receive from the estate are taxable.
As the legal representative, you are responsible for filing a return for the deceased for the year of death. This return is called the Final return.
You also have to file any returns for previous years that the deceased person did not file. If the person did not leave records about these returns, or if you cannot tell from existing records whether or not the returns were filed, contact us at
1-800-959-8281. If you have to file a return for a year before the year of death, use a T1 General Income Tax and Benefit Return for that year. Previous year returns are available on our website, or by calling 1-800-959-8281.
You have to file a
T3 Trust Income Tax and Information Return, for income of the estate earned after the date of death. If the terms of a trust were established by the will or a court order in relation to the deceased individual's estate under provincial or territorial dependant relief or support law, you also have to file a T3 Trust Income Tax and Information Return for that trust.

Note
You may not have to file a T3 return (not to be confused with the final return, which always has to be filed) if the estate is distributed immediately after the person dies, or if the estate did not earn income before the distribution. In these cases, you should give each beneficiary a statement showing his or her share of the estate. See the T4013, T3 Trust Guide, for more information and, where a trust is created, to determine whether that return has to be filed. See Chart 2 to find out what income to report on the T3 return.
As the legal representative, you may need information from the deceased person's tax records. Before we can give you this information, we need the following:
  • a copy of the death certificate;
  • the deceased's social insurance number; and
  • a complete copy of the will or other legal document such as a grant of probate, trust agreement, or letters of administration showing that you are the legal representative.
When you write for such information, include the words "The Estate of the Late" in front of the deceased person's name. Include your address so that we can reply directly to you. Send this information to your tax services office or tax centre.
Clearance certificate
As the legal representative, you may want to get a clearance certificate before you distribute any property under your control. A clearance certificate certifies that all amounts for which the deceased is liable to us have been paid, or that we have accepted security for the payment. If you do not get a clearance certificate, you can be liable for any amount the deceased owes. A clearance certificate covers all tax years to the date of death. It is not a clearance for any amounts a trust owes. If there is a trust, a separate clearance certificate is needed for the trust.
To request a certificate, complete
Form TX19, Asking for a Clearance Certificate, and send it to the assistant director, Audit, at your tax services office. Do not include Form TX19 with a return. Send it only after you have received the notices of assessment for all the returns required to be filed and paid or secured all amounts owing.
Provide us with the documents we ask for below to help us issue the certificate without delay. Attach to the Form TX19 the documents that apply to your situation:
  • a copy of the will, including any codicils, renunciations, disclaimers, and all probate documents. If the taxpayer died intestate, also attach a copy of the document appointing an administrator (for example, the Letters of Administration or Letters of Verification issued by a probate court);
  • a copy of the trust document for inter vivos trusts;
  • a statement showing the list of assets and distribution plan, including a description of each asset, adjusted cost base, and the fair market value at the date of death and at the date of distribution, if not at the same time. Also include the names, addresses, and social insurance numbers or account numbers of the recipients and his or her relationship to the deceased. If a statement of properties has been prepared for a probate court, we will usually accept a copy, and a list of any properties that the deceased owned before death and that passed directly to beneficiaries;
  • any other documents that are necessary to prove that you are the legal representative; and
  • a letter of authorization that you have signed or a completed Form T1013, Authorizing or Cancelling a Representative, if you want us to communicate with any other person or firm, or you want the clearance certificate sent to any address other than your own.
If you need more information about clearance certificates, call 1-800-959-8281. You can also see IC82-6, Clearance Certificate.
Types of returns
In addition to the final return, you can choose to file up to three optional returns for the year of death.
Information about the deceased's income sources will help you determine if you can file any of these optional returns. You do not report the same income on both the final and an optional return but you can claim certain credits and deductions on more than one return.
Types of returns
  • Final return
  • This type of return must always be filed for a deceased person.
  • Optional returns
  • There are three optional types of returns.
  • Chart 1
  • Summary of the income, deduction, and benefits that can be claimed on the final and optional returns.

Tax tip
Although you do not have to file any of the optional returns, there may be a tax advantage if you file one or more of them in addition to the final return. You may be able to reduce or eliminate tax that you would otherwise have to pay for the deceased.

Forms and publications

Deemed disposition of property
We discuss the tax treatment of capital property the deceased owned at the date of death. We deal with capital property in general (capital property other than depreciable property), as well as the particular treatment of depreciable property, and farm and fishing property transferred to a child. We discuss only property acquired after December 31, 1971.
There are special rules for property that a deceased person owned before 1972. For details about these rules and for information about other property such as eligible
capital property, resource property, or an inventory of land, contact us at 1-800-959-8281.
When a person dies, we consider that the person has disposed of all capital property right before death. We call this a
deemed disposition.
Also, right before death, we consider that the person has received the
deemed proceeds of disposition (we will refer to this as "deemed proceeds"). Even though there was not an actual sale, there can be a capital gain or, except for depreciable property or personal-use property, a capital loss.
For
depreciable property, in addition to a capital gain, there can also be a recapture of capital cost allowance. Also, for depreciable property, instead of a capital loss there may be a terminal loss.
What is a capital gain?
When the proceeds or deemed proceeds of disposition of a capital property are
more than its adjusted cost base, the result is a capital gain. In most cases, one-half of the capital gain is the taxable capital gain.
Use
Schedule 3, Capital Gains (or Losses), to calculate the taxable capital gain to report on the final return.
What is a capital gains deduction?
This is a deduction you can claim for the deceased person against eligible taxable capital gains from the disposition or deemed disposition of certain capital property.
You may be able to claim the capital gains deduction on taxable capital gains the deceased had in 2014 from:
  • dispositions or deemed dispositions of qualified farm property or, after May 1 2006, qualified fishing property;
  • dispositions or deemed dispositions of qualified small business corporation shares; and
  • a reserve brought into income from either of the above.
Important notice
The lifetime capital gains exemption has been increased from $750,000 to $800,000 for dispositions in 2014. Since the inclusion rate for capital gains and losses is 50%, the lifetime capital gains deduction limit has been increased from $375,000 (one-half of $750,000) to $400,000 (one-half of $800,000) for dispositions in 2014.
For more information, see Line 254 - Capital gains deduction.
What is a capital loss?
When the proceeds or deemed proceeds of disposition of a capital property are
less than its adjusted cost base, the result is a capital loss. One-half of the capital loss is the allowable capital loss. You cannot have a capital loss on the disposition of depreciable property or personal use property.
For more information on claiming a capital loss, see
Net capital losses in the year of death.
Recaptures and terminal losses
For depreciable property, when the proceeds or deemed proceeds of disposition are
more than the undepreciated capital cost, you will usually have a recapture of capital cost allowance. Include the recapture in income on the deceased's final return.
For depreciable property, when the proceeds or deemed proceeds of disposition are
less than the undepreciated capital cost, the result is a terminal loss. Deduct the terminal loss on the deceased's final return.

Note
A terminal loss is not allowed for depreciable property that was personal-use property of the deceased.
For more information about a recapture of capital cost allowance or a terminal loss, see Interpretation Bulletin
IT478, Capital Cost Allowance - Recapture and Terminal Loss.


What if the deceased was receiving the GST/HST credit
Generally, GST/HST credit payments are issued on the fifth day of the month in July, October, January, and April. If the deceased was receiving GST/HST credit payments, we may still send out a payment after the date of death because we are not aware of the death. If this happens, you should return the payment to the tax centre that serves your area.
Note
We administer provincial programs that are related to the GST/HST credit. If the deceased was receiving payments under one of these programs, you do not have to take any further action. We will use the information provided for the GST/HST credit payments to adjust the applicable credit.
What if the deceased was single, separated, divorced, or widowed and received the GST/HST credit?
If the recipient died
before the scheduled month in which we issue the credit, we cannot make any more payments in that person's name or to that person's estate.
If the recipient died
during or after the scheduled month in which we issue the credit and the payment has not been cashed, return it to the tax centre that serves your area so that we can send the payment to the person's estate.
If the deceased was getting a credit for a child, the child's new caregiver should contact us at
1-800-959-1953 to request GST/HST credit payments for that child.
What if the deceased's GST/HST credit is for the deceased and his or her spouse or common-law partner?
If the deceased had a
spouse or common-law partner, that person may be eligible to receive the GST/HST credit if he or she filed an income tax and benefit return. The GST/HST credit payments will be based on his or her net income alone.
What if the surviving spouse's or common-law partner's GST/HST credit includes a claim for the deceased?
If the surviving spouse's or common-law partner's GST/HST credit included an amount for the deceased, the payments will be recalculated based on his or her net income alone and will only include a claim for himself or herself and any children, if applicable.
What if the deceased is an eligible child?
Entitlement to GST/HST credit payments for a deceased child stops the quarter after the child's date of death. You should notify us of the date of death so that we can update our records.
Forms and publications
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