Estate, trust and final tax returns for executors and families.

Guide

An executor's guide to tax after a death in BC.

Being named executor often comes at a hard time. The tax side follows a predictable order, and knowing the steps makes it far more manageable.

Step 1: Gather the paperwork

• The will and any probate documents
• The deceased's recent tax returns and notices of assessment
• Statements for bank, investment, RRSP and RRIF accounts
• Details of real estate, including the home and any rentals
• Information on any private company shares or trusts

Step 2: The final T1 return

The final return reports income from January 1 to the date of death. At death, most capital property is treated as sold at fair market value, which can create capital gains. RRSP and RRIF balances are generally included in income too, unless they pass to a surviving spouse or partner.

Step 3: Optional returns

In some cases, separate optional returns can be filed for certain income, such as amounts owed to the deceased but not yet paid. Each optional return can claim some personal credits again, which can lower the total tax. We check whether they apply.

Step 4: The estate's T3 returns

Income the estate earns after death, such as interest, dividends or rent, is reported on T3 trust returns. An estate can qualify as a graduated rate estate for up to 36 months, which gives it access to lower graduated tax rates and some planning options.

Step 5: Probate in BC

BC charges probate fees on the value of assets that pass through the will. Fees are about 1.4% of the estate's value above $50,000, and assets passing directly to a named beneficiary or held jointly usually aren't included.

Step 6: Clearance certificate

Before distributing everything, most executors request a clearance certificate from the CRA. It confirms all taxes are paid. Without it, you can be personally liable for amounts the estate owes.

Planning ahead

If you're planning your own estate, alter ego and joint partner trusts (for people 65 or older) and careful beneficiary designations can reduce probate and simplify things for your executor. We work with your lawyer on the tax side.