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Monday, September 21, 2015

Is three years too long to wait for a Tax Clearance Certificate?

The wait for Tax Clearance Certificates can seem endless, fraying the patience of both the executor and the beneficiaries. We know it takes a really long time, but how long is too long? Recently a reader asked me about this. His question and my answer follow:

"We've been waiting 3 years to get our clearance certificate. Is this normal? What should be the expected processing period? The 2 of us are beneficiaries and the executor is poor at communicating to us. Are there any steps we can take to speed up the process?"

I would say that three years is longer than normal to wait for the receipt of a Tax Clearance Certificate. You should expect to wait at least six months, and realistically more like a year.

One thing that might shed some light on your situation is the fact that the waiting time for the Clearance Certificate does not start running on the death of the person, or even from the date of probate. The waiting time begins once the application for it has been sent to Canada Revenue Agency by the executor, or by an accountant on behalf of the executor. Keep in mind that the executor cannot even apply for the Clearance Certificate until all tax returns have been filed and all taxes have been paid.

This means that the executor has to wrap up the entire estate before applying. He might not be in a position to send in the application for the certificate until a year or two after someone has died.

Since you have said that the executor is not good at communicating with you, it is probably safe to say that you haven't been told exactly when the application was made. Perhaps you might ask the executor for confirmation as to when the application was sent.

As for your last question, no I don't know of anything you can do to speed up the process. I wish I did. In fact, if you contact Canada Revenue Agency, they won't even give you any information because you're not the executor.

22 comments:

  1. Hi

    Can the Executor distribute partial sums before receipt of the Certificate of Clearance, if they withhold enough for taxes and contingencies?

    Thanks

    ReplyDelete
    Replies
    1. Yes, definitely. That is called an Interim Distribution. I would say that the majority of executors decide to distribute this way. As I've said many times, though, the real question is never "can" the executor do something, but "should" he. It's always the executor's call as to any associated risks and benefits.

      Lynne

      Delete
    2. I have been waiting for. 5 years for this Clearance certificate and im nit getting any responce drom anyone

      Delete
    3. 710buddha,

      Did you apply for it yourself or did the accountant apply? If the accountant applied for it, ask him or her to follow up. If you sent in the application yourself in your name, CRA should have no reason not to speak with you and follow up on the progress of the certificate. The passage of 5 years is excessive and suggests that either nobody actually applied for it, or the application has been misplaced and needs to be re-done.

      Lynne

      Delete
  2. I am in Ontario & it is done all the time, because no one complains. However, there was a report that the law has changed and from now on the Certificate of Clearance is mandatory. My brother broke a dozen laws and got away with it because my mother was afraid of him, so after 14 years I am stuck with the job. What I have learned is don't wait, if an executor is not doing his/her job get a good lawyer and file a complaint in the court immediately.

    ReplyDelete
  3. Hi Lynne,

    This is off topic, but I wasn't sure where else to post to appropriately and I haven't been able to find any useful information. My apologies!

    My sister passed away last November, and the family filed her final income tax as required earlier this year. In her will, she wanted to leave everything to my parents, with her estate paying for the taxes for any RRSPs, etc. We thought we had all of her assets and accounts covered, but I just recently came across another RRSP account that we were unaware of.

    Under the circumstances, I'm not sure what we can do regarding the taxes from this transfer of monies. Since the 'final' income tax was already filed, are we able to submit and pay the taxes for this 'straggler' account via my sister's estate? or will my parents need to cover the taxes on this now?

    Thanks!
    -Donald

    ReplyDelete
    Replies
    1. If you've finalized all of the taxes in your sister's estate, that should mean that there are no more assets other than the "straggler" RRSP. Therefore, are there even any funds around to pay for taxes? If the estate cannot pay for the taxes then yes, your parents will have to pay the taxes on the RRSP.

      Lynne

      Delete
  4. Since the estate is so recent, and the income tax people have 7 years to come back on you, personally after the fiasco I have endured I would strongly recommend you call to the Tax people direct. When I had trouble with mom's taxes I called asking for someone in higher authority, or management wanting proper advise. They were very kind to me and I think it is best to play it safe.

    ReplyDelete
  5. Also, I had to go through all mom & dad's drawer to find all the bank accounts. They were very careless about keeping records. Some were still active with small amounts but not used for many years.

    ReplyDelete
    Replies
    1. I think that's probably the way it is with most people. I know that I've worked on many an estate where the family has walked into my office with a huge cardboard box full of every scrap of paper they could find in the house and given it to me to sort out. There always seemed to be things not finished or closed, maybe things that people meant to work on one day but forgot about. Most people don't really keep great records.

      Lynne

      Delete
  6. Hello: The executors have received the Notice of Assessment and it states, all clear. $0 owing. That was May of this year. The request for the Clearance Certificate was sent at that time. It is now October and nothing. They were told by CRA, 6 months. Is there any way to speed up the CRA, as the executors are very slow about finding out anything for us. We are 3 girls, that are beneficiaries and have medical, disability and caregiver issues.

    ReplyDelete
    Replies
    1. No, there is no way that I have ever heard of to speed up CRA and the production of Clearance Certificates. If I ever find out the secret, I'll let the world know, believe me.

      Lynne

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    2. Is there ever any reason, as to why CRA takes so long? With everything assessed and done, one would think it would be a faster process.

      Delete
  7. Again as I said before. Government are slow sometimes but calling direct to them would be not out of order. At least confirm they even got the papers etc. Besides it costs nothing to call, & check it out.

    ReplyDelete
    Replies
    1. Calling directly will work for the executor. Nobody else will find out anything because CRA won't speak with those who do not have legal authority to represent an estate.

      Lynne

      Delete
  8. TRUE! And if the Executor is doing nothing as my brother - then get them removed swiftly or loose hundreds of thousands as he cost my mom.

    ReplyDelete
  9. Hello
    My fathers estate was cleared in November by the cra.

    How long should it take for the funds to be distributed? It’s been 3 months so far.

    Should the secretary be charging for bothering the lawyer? Or just the actual contact with the lawyer?

    Thank you
    Kevin

    ReplyDelete
    Replies
    1. If the tax clearance certificate was the last thing the executor was waiting for, then the funds should be disbursed as possible. It could be that something needs to be cashed in (GICs) or sold (mutual funds) but that kind of thing shouldn't take 3 months.

      If you are looking for progress reports, you should be "bothering" the executor, not the lawyer. The executor is the client and is the one bearing all the risk of the estate, so he or she is the one with the final say over when funds go out.

      As for your question about the secretary, the answer really varies from place to place. In most firms, if there is a paralegal working on the file, you pay by the hour to talk to the paralegal. If it is a receptionist, there should be no charge. But if there is a secretary who has to go in and ask the lawyer a question, of course you'd pay for that because it's the same as you asking the lawyer the question.

      Lynne

      Delete
  10. I am a Co-Executor of an Estate. My Co-Executor has been very difficult in adminitering the esttate. Delaying, obstructing the collapse so that we can file the final tax return and also refuses to invest millions of $ that are sitting at 0% in a bank account currently. I have obtained a tax opinion stating $100K should suffice as a hold back and to distribute the assets to the beenficiaries. In addition the tax opinion states the Executors can invest the money while we wait for clearance and any gains or income from the invested estate can be attributed back to the beneficiaries equally as we divide the estate and not the estate, truly keeping the estate closed for CRA purposes to not attract any taxable income/gains. My co-executor refuses and insists on keeping the funds in cash with no return for no reason. I disagree as I feel we have a fiduciary responsibility to handle the inheritance on the beneficiares behalf of the beneficiaires prudently which is not investing at 0%. I am looking to have my Co-Executor removed this situation is going on now for 3 years. Any thoughts?

    ReplyDelete
    Replies
    1. I think getting the co-executor removed is the only way to limit your own liability. Not investing millions of dollars is clearly costing the estate (and therefore the beneficiaries) a loss. They can sue for that. While co-executors cannot be held liable for what the other one does fraudulently or negligently, that general rule is countered by the concept that if you simply sit by and let it happen, you are being complicit. All of a sudden you're part of the problem and possibly part of the lawsuit.

      Removing an executor is a nasty sort of litigation but in this case it seems necessary.

      Lynne

      Delete
  11. Don't wait - do what you can quickly. My mother and I did not get that advise and by the time we tried to get my brother removed as executor it was to late. He had committed fraud, embezzlement and the fraud time limit was just 2 years and worse the court viewed our delay in fighting him in court as meaning we approved of anything he did.

    ReplyDelete

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