As an executor of a deceased person’s estate, you are responsible for filing any necessary estate returns with the CRA. When a person passes away, their estate becomes a separate legal entity for tax purposes. This is separate from a terminal or final return, which you file on behalf of the deceased person. An estate return is filed on behalf of the estate itself.
What is an estate return?
In Canada, an estate return refers to the tax return filed for a deceased individual’s estate. As the executor of the estate, you are responsible for reporting all income generated by the estate from the date of death until the final distribution of assets to beneficiaries on a T3RET T3 Trust Income Tax and Information Return.
What types of income does an estate generate?
An individual’s estate begins existence at the date of their death, so any income it generates from that date onwards will need to be reported in an estate return.
Types of income an estate may generate after an individual’s death include:
- Investment interest
- Rental income
- Business income
- Capital gains from the sale of assets
View our full estate return checklist for more information.
What is a Graduated Rate Estate?
A Graduated Rate Estate (GRE) is an estate that exists as a result of an individual’s death. You may elect to file as a GRE for up to 36 months after the date of death.
You may choose to file as a GRE because:
- Income earned by a GRE is taxed at the same graduated tax rates as individual taxpayers, rather than the highest marginal tax rate.
- There are certain tax advantages to making charitable donations as a GRE under certain conditions. See the CRA website for more details.
- If there are capital losses incurred in the estate in the first year, the GRE might be able to carry the losses back to the terminal return.
What is the deadline for filing an estate return?
The estate’s T3 return, any related T3 slips, NR4 slips, and T3 and NR4 summaries are due no later than 90 days after the estate’s tax year-end. The estate’s year-end depends on whether you elect to file as a Graduated Rate Estate (GRE).
- If you elect to file as a GRE, the year-end can be any date up to one year after the date of death and you must file no later than 90 days after that date.
- If you do not elect to file as a GRE, or if you are filing an estate return beyond the 36 month GRE period, the year-end is December 31 and you must file no later than March 31.
Need help administering an estate?
If you need assistance with filing tax returns for a deceased individual, our experienced trusts and estates team is here to help.
Seeking expert help can ease some of the stress of acting as an executor and allow you to focus on the most important priorities.
Contact us to learn how we can help.
This post has been prepared for general information purposes. It is not advice. The information presented may not fit your unique situation, please consult one of our trusted business advisors at RHN CPA for further clarification and interpretation of your circumstances.