Do you have someone in your family that has passed away this last year?
The Canada Revenue Agency has information on its website and a few publications (RC4111) regarding the responsibilities of the people safeguarding the assets of the deceased and what needs to be done when someone has passed away.
The easiest way for surviving family members to wind up your affairs is if you have a will in place. The will should name the legal representative who would be the executor of the will. If there is no will, then the court will appoint an administrator as the legal representative. The legal representative can charge a fee to the estate to be compensated for the time taken to wind up the affairs of the deceased.
Probate is the process of getting the court to rule that a will is legally valid. If the person dies with assets such as land, house or investments, the will is usually required to go through probate. There are fees for the process depending on the value of the assets in the estate. Canada does not have inheritance tax, but there is probate which is a provincial fee on the assets of the deceased, that could be considered inheritance tax. Each province has its own fee structure.
If you are the legal representative, your responsibilities under the Income Tax Act are to file all the required returns for the deceased, make sure that all taxes owing are paid and you need to inform the beneficiaries if any of the amounts that they will receive from the estate are taxable.
The first thing you need to do is to let CRA know that the person has deceased. When this happens CRA will remove all representatives from the deceased’s account and will stop all automatic payments such as the GST/HST or transfer these payments to the surviving spouse. At this time the representative needs to provide to CRA a copy of the death certificate, the SIN of the deceased, copy of the will or other legal document such as grant of probate or letter of administration indicating who the legal representative is. If you have hired an accountant to prepare the final returns, the accountant can submit these documents to the CRA when they apply for access to the deceased’s account.
Under the income tax act, the deceased person is deemed to have disposed of all capital property at the time of death. If the assets cannot be distributed on the day of death, they roll over into what is called a testamentary trust, also requiring a tax return. Then when the assets are finally distributed, the testamentary trust is closed.
Finally after all the returns have been filed and you have received the assessment notices from CRA and before any property is distributed, the legal representative should request a Clearance Certificate from CRA. This document will absolve the legal representative from any more claims by the CRA.