The role of estate executor in Canada is one that seems simple–gathering up the assets, paying the debts and dividing what remains to beneficiaries–but is complicated in practice. Being an executor can be time consuming, complex and emotionally draining, especially if you were close to the deceased.
Even if you have previous experience being an executor, no two estates can be managed in the same way. Before you begin probating an estate, it’s vital that you ask yourself if you’re capable of completing the task. Once you begin, you are legally required to complete the job, but with that being said, no one can force you to agree to be an estate executor.
Here are important things to know about being an estate executor.
Executor’s responsibilities to Canada Revenue Agency (CRA)
The executor is responsible for filing all required tax returns for the deceased,
ensuring all taxes owed are paid, and letting beneficiaries know which of the amounts they receive from the estate are taxable, if any. You’re also responsible for obtaining a clearance certificate that certifies there are no longer any amounts owing to CRA.
This means you’ll have to file a return for the deceased for the year in which they died (known as a Final Return). If the deceased did not file returns for any previous years, you’re responsible for filing those as well. Additionally, you’re responsible for reporting any income the estate earned after the date of death, if the estate earned income.
Among the duties of an executor:
• Identifying and collecting the estate’s assets
• Safeguarding assets until they can be distributed to beneficiaries
• Paying debts and liabilities owed by the estate
• Filing appropriate tax returns for the deceased and the estate
• Distributing assets to beneficiaries.
Within those activities there are many responsibilities that must be fulfilled, and the exact nature of those responsibilities varies between provinces and territories.
Here are additional responsibilities as they relate to CRA.
- Inform CRA of the deceased’s date of death
- Make arrangements to stop payments/ transfer payments to a survivor if the deceased received GST/HST credits; Canada Workers Benefit payments; or Canada Child Benefit
- Inform Service Canada of the death
- Return any credit payments issued after death to your nearest tax centre.
As the estate’s legal representative, you can authorize someone to deal with the CRA on your behalf regarding tax matters.
When can an executor in Canada release funds?
There’s no specific time frame for when funds must be disbursed by, rather they are disbursed after all debts have been paid, including any tax returns. Typically, an executor waits until receiving a Tax Clearance Certificate from Canada Revenue Agency before distributing the funds, in case there are any unexpected taxes owed by the estate.
The executor is allowed to disburse funds before this point, but will then be personally responsible for paying any tax bills owed. The simplest way for an executor to not have to pay personally for estate income taxes is to not distribute the estate until after receiving the Tax Clearance Certificate.
The best way to determine how much money should be held is to work with an accountant at Boyer & Boyer CPA, who can estimate what amount will be owed by the estate.
Planning your estate
If you’re in the process of planning your estate, the experienced financial team at Boyer & Boyer, CPA, can help you with financial & tax planning and advisory services, to ensure your wishes are carried out after death. We can also help make sure you only pay your fair share of taxes to maximize the amount available for your loved ones.
If you’re an executor, Boyer & Boyer, CPA can help with many of the activities involved in estate management, including:
• Understanding the executor’s role and responsibilities
• Financial reporting for the beneficiaries
• Completing the required tax returns
• Guiding the executor on what needs to be done
Contact Boyer & Boyer today to discuss your estate planning and management needs. | 613-747-8494 | Contact Page | Email |
