Note that tax installments are not required to be made after the date of death except those that were due but not paid prior to the date of death. Any balance of tax owed by the deceased will be due upon filing their final tax return.
Published: April 17, 2024
Updated: April 17, 2024
Losing one’s spouse or common-law partner is not only extremely distressing, it can also be overwhelming. In addition to the sadness of this situation and having to adjust to life as a widow or widower, a surviving spouse or partner is often faced with many unpleasant decisions, and the task of sorting out their deceased loved one’s financial affairs.
Losing one’s spouse or common-law partner is not only extremely distressing, it can also be overwhelming. In addition to the sadness of this situation and having to adjust to life as a widow or widower, a surviving spouse or partner is often faced with many unpleasant decisions, and the task of sorting out their deceased loved one’s financial affairs.
This article is Part I of a two-part article and highlights many of the steps that should be followed after the death of a spouse or common-law partner. Stay tuned for Part II, which will address several key income tax consequences of an individual’s death. Please note that for the balance of this article all references to spouses include common-law partners.
Contact the Canada Revenue Agency and Service Canada
It is very important that the Canada Revenue Agency (CRA) be notified shortly after the death of a loved one. This can be done by completing a Request for the Canada Revenue Agency to update records (included with RC4111) or by calling the CRA at the number indicated on the form instructions. Often, the funeral home you are using for funeral arrangements will offer to help you with these forms. This will help facilitate the arrangements that must be made to stop payments or, if applicable, transfer credits or payments to you, where the deceased individual was receiving:
- The goods and services tax/harmonized sales tax credit or Canada Carbon Rebate
- Canada Workers Benefit advance payments
- Canada Child Benefit payments for a child
To help determine if you can transfer specific amounts to yourself and for assistance with any transfers, contact your BDO advisor.
Keep in mind that there are other federal departments or agencies that you may need to contact. The Government of Canada website provides details to assist with the process as well as resources on how to order a death certificate and cancel the deceased person’s identification cards, registrations and other personal documents. Service Canada should be informed of the death of an individual who was 60 years of age or older at the time of death so that benefits such as Old Age Security and Canada Pension Plan (CPP) can be cancelled. In addition, you may be entitled to a CPP death benefit and survivor benefits. If the funeral home offers to notify the CRA and Service Canada on your behalf, it would be useful to confirm their steps to avoid any duplication.
Determine the legal representative
The legal representative of your deceased spouse has a number of key income tax-related responsibilities. As a result, it is important to ensure that the legal representative is identified and completes their many responsibilities. Keep in mind that you will be considered to be the legal representative in cases where you are:
- Named as the executor in the deceased’s will
- Appointed as the administrator of the estate by a court
- The liquidator for an estate in Québec
In this case, for online access, the first step is to register for the CRA’s Represent a Client service so that you will receive a Representative Identifier (RepID). Once done, you can then submit the following required information and documents to the CRA via Represent a Client to request authorization as the deceased’s legal representative:
- A copy of the death certificate
- 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 or if there is no will or other legal document, submit RC552 Register as Representative for a Deceased Person
- The new mailing address for the estate (if applicable)
- A completed Request for the Canada Revenue Agency to Update Records
- On each of the above documents, indicate your spouse’s social insurance number and your RepID
Once the CRA has received and processed the documents, you will have online access to your spouse's tax records.
File all required tax returns for the deceased individual
The legal representative is required to file the deceased individual’s final T1 income tax and benefit return. This tax return includes all income earned in the year of death from January 1 up to and including the date of death. Income taxable on the final tax return includes income arising from the distribution of property or the deemed disposition of capital assets, both of which will be discussed in Part II of the article.
It is very important to file the final T1 return on time, as the CRA will impose penalties and interest when this return is late and a tax balance is owing. Having noted that, if the death of your spouse occurred between January 1 and October 31 (or from January 1 to December 15 for individuals carrying on a business), the due date for the final return is April 30 of the following year (or June 15 for individuals carrying on a business).
If the death occurred between November 1 and December 31 (or from December 16 to December 31 for individuals carrying on a business) the due date for the final T1 return is six months after the date of death. Keep in mind that as the surviving spouse, the due date for filing your personal T1 return is the same as the due date for your deceased spouse or partner’s final T1 return. However, any balance owing on your T1 return must be paid on or before April 30 of the year following the year of death to avoid interest and penalties.
If your spouse dies early in the calendar year and before the due date of their previous year’s income tax return, the deadline for that previous year’s return is extended until six months after the date of death. The due date for the payment of income taxes is also extended to six months after the date of death. As the surviving spouse, note that your T1 return has the same extended due date, but any balance owing on this return will still be due on April 30.
Income earned in your spouse’s name in the year of death but after the date of death must be reported on a T3 trust income tax and information return. The legal representative must file the final T3 return and pay all balances owing no later than 90 days after the end of the year of the estate.
Note that if the estate is a graduated rate estate, the estate can choose a year-end, and the first year-end cannot be more than a year after the date of death. If an ongoing trust is provided for, the legal representative will have further T3 return filing responsibilities.
Consider filing optional income tax returns for the deceased individual
There are three optional income tax returns that may be filed for your deceased spouse, if applicable, which may eliminate or reduce income taxes otherwise owing. By filing more than one income tax return, your spouse's income earned in the year of death may be split amongst the applicable returns which can be offset against certain additional deductions and tax credits. The optional returns include:
- Return for rights or things
- Return for a partner or proprietor
- Return for income from a graduated rate estate of another person who died
You should note that the filing dates for these returns and the payment of any balances owing are the same as those for a final return, with an exception for the return for rights or things. For this return, the filing and payment deadlines are the later of one year following the date of death or 90 days after the date a notice of assessment or reassessment is mailed in respect of the final return.
Your BDO advisor can help determine if any of these optional returns are beneficial to file and if so, they can assist with preparing and filing the return(s).
Obtain a clearance certificate
In addition to filing the required returns for the deceased individual, before making any distribution of property from the estate, the legal representative must ensure that all taxes owing for the year of death and all previous years are paid. To do this, a clearance certificate should be obtained from the CRA, which certifies that all amounts for which the deceased is liable to the CRA have been paid or that the CRA has accepted security for the payment of amounts owing. This is an important step to take.
If a clearance certificate is not obtained, the legal representative can be personally liable for any amount of tax that the deceased individual owes. A clearance certificate covers all taxation years to the date of death. Keep in mind, however, that this is not a clearance for any amounts that a trust or the estate owes. As a result, a separate clearance certificate will be needed.
How BDO can help
Dealing with the loss of a spouse is sad and overwhelming. There are many decisions to be made and tasks to be accomplished. Armed with a good understanding of what needs to be done following the death of your spouse may make this difficult time less daunting. Talk to a BDO advisor who can help you navigate your way through this time.
The information in this publication is current as of March 1, 2024.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.