Trust & Estate Return

Trust & Estate Return

Trust returns are most commonly created on death and assets are left to be distributed to beneficiaries. As trusts are relatively obscure and complex legal arrangements, the expertise of a trained professional is always recommended.

Trust Return T3From $750
T3 slips for allocations to beneficiariesFrom $300
Clearance Certificate on final distributionFrom $300

Tax on death

On the date a person passes they are deemed to sell all of their assets for fair market value. If they are survived by a spouse many of these assets can be rolled over to the spouse on a tax free basis.

However; if there is no surviving spouse then most of their investments will realize capital gains up to their date of death including RRSP’s. The full balance of their RRSP will be included in income on their final return as well as any income received up to that point.

Any income earned after their death must be reported on a trust return, though there are ways to allocate this income out to beneficiaries.

Estate accounting and tax process

  1. You should contact the accountant you will be using for the estate including the final personal tax return and provide them with a copy of the will and death certificate.
  2. It is often recommended to move all of the deceased’s investments into an estate account that does not accrue interest or other income as any income will have to be reported on a Trust return which can extend the process.
  3. The final personal tax return of the deceased will report the disposition of any investments, houses other taxable properties they owned at the value on the date of their death. If they had large capital gains or sizeable balances in their RRSP account this can create significant taxes unless they have a surviving spouse to whom the assets can be rolled on a tax deferred basis.
  4. Once all sources of income have been converted into an estate account (or one year from death if earlier) the trust return can be filed. The CRA will take approximately 2-4 months to process.
  5. After the CRA has processed the final trust return a clearance certificate can be filed, whereupon the CRA agrees that all personal and estate taxes up to that date have been paid. This takes a further 2-4 months for CRA to process but once approved it greatly reduces executors liability if unreported tax liabilities later surface.
  6. Once the clearance certificate is received the estate will usually do a final distribution of the remaining assets.

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