Personal Finance

Winding up Estate Account

  • Last Updated:
  • Feb 14th, 2018 10:38 pm
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[OP]
Newbie
Jan 26, 2016
6 posts
Toronto, ON

Winding up Estate Account

I am the executor of my late Father and asking for help about how to wind up the estate account.

After probate(the bank insisted), his RIF got transferred to the estate account which is a checking account with the bank. That's all for his estate.

His last T1 return was filed and income tax was paid on the RIF transferred. Now, I plan to distribute the estate to the beneficiaries once I got the Notice Of Assessment.

Questions:

Is a T3 Trust return needed for the estate account after distribution?

Do the beneficiaries need to report that on their tax return?

Thanks in advance for your help.
8 replies
Member
Oct 2, 2005
399 posts
15 upvotes
I'm no expert in this area but I have recently settled my father's estate so I can answer based upon my experience. There is a missing piece of information in your post. When did your father pass away and how long has the estate account been opened. Is the T1 return you filed the "Final Return"? The T1 Final Return is required and other returns (Right & Things return and T3 Trust Return are optional). The T3 Trust is used to report income after the time of death and until the estate is settled. It is unclear if there was any income earned by the estate account. If tax was paid on the distribution of the RIF it is not taxed by the beneficiaries.
[OP]
Newbie
Jan 26, 2016
6 posts
Toronto, ON
Thanks for the info, mexicanbandit.

The T1 is the final return. The estate account was opened last year and it did not have interest paid.
Member
Oct 2, 2005
399 posts
15 upvotes
No problem. I don't think you need a T3 Trust return in your case. You can also call the CRA and they can confirm.
Deal Addict
User avatar
Jan 27, 2007
4899 posts
834 upvotes
Peterborough
No T3 is required.

Beneficiaries do not need tax reporting from the estate.

Sorry for your loss.
[OP]
Newbie
Jan 26, 2016
6 posts
Toronto, ON
Thank you for the info, dutchca.

I'll talk to CRA. Hope the wait is not too long.
Deal Addict
Feb 4, 2015
2858 posts
535 upvotes
Canada, Eh!!
Our condolences.

When dealing with same for Dad the estate chequing acct actually was closed by bank after there was no activity for like almost a year [might vary by bank].

Then unexpectedly got some utility rebate so had to open new estate chequing account. Suggest check with bank if can keep open or if easy to open new acct should need.
Member
Mar 13, 2012
323 posts
81 upvotes
Sarnia
Is a T3 Trust return needed for the estate account after distribution?
If your father qualified for the CPP Death Benefit (max. $2500), this can be reported on a T3. The advantage of doing this is that the benefit is taxed at the lowest graduated income tax rate if there is no other income to report on the T3. Otherwise, if the benefit is claimed by a beneficiary, it is added to the beneficiary's income and taxed at his/her presumably higher income tax rate. The benefit should not be reported on the deceased's final return.

Have you also considered filing for a Tax Clearance Certificate before distributing the estate? It does take a while to receive, but it does protect the executor should any income tax claims appear at a later assessment. If income tax liabilities do appear after the estate is distributed, the executor is on the hook to pay them.
Member
Jun 28, 2011
239 posts
40 upvotes
VANCOUVER
If the estate doesn't have any revenue earned after the final T1 has been filed, then no T3 is needed.
The estate would have paid taxes on the RIF.

Beneficiaries wouldn't need to report on their taxes return and in cases where they do, there's a limit of $500.
If it's more than that, I believe the estate is responsible.

re: tax clearance certificate
Unless the beneficiary is an only child or a spouse (as well as being the executor), a tax clearance certificate is a good idea.
Again, CRA can help on this and they do have an Estate department.

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