When a loved one passes away, many people find themselves unprepared for what comes next. At Canwest Accounting, we assist grieving families with tax filings that need to be done through the Canada Revenue Agency (CRA) and should be completed and paid before assets from the estate are distributed to the beneficiaries.
“A lot of people don’t want to think about a family member passing and what happens afterwards,” said Sharlane. “However, piecing together all of this yourself when grieving a loss can be overwhelming, which is why we’re sharing information about which government agencies to contact and what tax filings need to be done. At Canwest Accounting, we’re here to help.”
Notifying the Government
- Notify the CRA of the date of death as soon as possible by calling 1-800-959-8281 or complete the following form to update records and mail it to the deceased’s tax centre.
- Request that the CRA stop paying the following benefits and, if possible, transfer them to the deceased’s spouse: goods and services tax (GST), working income tax benefit advance payments, COVID benefits, and the Canada child benefit.
- Service Canada should also be informed about the date of death. Call 1-800-622-6232 for more information or go to any Service Canada site.
Required Tax Filings
- A T1 (personal return) is filed for the deceased individual. Per CRA, the deceased is considered to have disposed of all their assets at fair market value upon death. If the person had real estate and land assets, it is essential to get an appraisal. Similarly, if they had investment accounts, it is important to get a fair market value report from the broker at the date of death.
- Capital gain tax will be paid upon deemed disposition of assets – upon their death, not the date the executor sells the assets.
- Beneficiaries will receive the assets deemed fair market value, which reduces their capital gain in the future. For example, if the deceased bought a rental property at $100,000 and it was worth $200,000 upon the date of death. The deceased’s final tax return will include $100,000 in capital gain. The beneficiary will receive an asset now valued at $200,000.
- Estate returns, called T3 returns, are not filed until all the assets have been distributed to the beneficiaries. You will include the investment income earned and any other taxable income in a T3. Deductions are limited to necessary expenses to earn the income, such as investment counsel fees. You cannot deduct funeral expenses, probate fees, or fees to administer the estate. Depending on the situation, it is better for the income to pass through to beneficiaries when the estate issues T3 slips to beneficiaries for the income earned by the estate.
To have the exceptional team at Canwest Accounting save you time and money by doing your bookkeeping, tax planning for your business, filing estate returns, or completing and filing forms for subsidy programs, call or email us. Unfortunately, our offices in Victoria and Langford are still closed to the public to keep everyone safe during the COVID-19 pandemic, but we have a pickup and drop off service that is very convenient.
The suggestions and advice provided by Canwest Accounting should not be relied upon in place of professional advice. You are responsible for checking the accuracy of relevant facts and opinions provided.