Real Time Web Analytics

Pages

Monday, July 5, 2010

How do I get a Tax Clearance Certificate


A tax clearance certificate is a notice you receive from Canada Revenue Agency that states that all taxes owing on an estate have been paid. Although it is not the law that every executor must get one, the majority of executors will do so. This is because if the executor goes ahead and distributes the estate to the beneficiaries and then later finds out that there is tax owing, the executor himself might have to pay the taxes out of his own money.

I'm often asked how a person goes about getting a tax clearance certificate. The certificate does not come out automatically; it has to be requested in the right way at the right time. The vast majority of executors that I've worked with have asked the accountant who does the tax returns for the estate to request the clearance certificate. This is because accoutants who are familiar with taxation know how and when to get it.

However, if you want to request one yourself, here are the basic steps:


  1. file all of the necessary tax returns for the deceased and the estate;

  2. receive the Notice of Assessment for the returns you've filed;

  3. fill in a form called TX19, that you can find online here;

  4. send the form to your local tax office, along with a copy of the Will, a copy of all probate documents and a statement of proposed distribution.

  5. wait.

It takes a long time to get the tax clearance certificate. You should expect to wait several months in most cases. Because of the long wait and the unwillingness of beneficiaries to wait longer than necessary for their inheritance, there is a process in place for making an interim distribution of the bulk of the estate while keeping back enough money to pay the taxes and future expenses. I'll post about that interim process in a separate post.

To go to the Canada Revenue Agency page on clearance certificates, click here.

40 comments:

  1. Are beneficiaries required to provide their SIN number to estate executors for any reason at all??

    ReplyDelete
  2. I am confused about the period covered. For someone that died in 2012, do I put the date of death or December 31 or the date of requesting it? I don't want to date it now if CRA is going to ask for a 2013 tax return.

    ReplyDelete
  3. Our lawyer said he had the Certificate of Clearance and distributed the inheritance. Now one year later Canada govt re-assesses and says there is almost 100k owing. Is it up to the beneficiaries to pay or has the laywer made a mistake and should be responsible?

    ReplyDelete
    Replies
    1. Did the lawyer actually have the certificate? If he really did have it, he didn't make a mistake. I assume you have a copy of the certificate.

      Also, who applied for the certificate? Did the lawyer apply for it, or the accountant? I'm wondering because the certificate would have been based on the information on the tax returns. Lawyers should not be preparing tax returns for the estate, so I hope you had an accountant for that. If the lawyer prepared the actual tax returns for the estate, then yes, he made a big mistake and should be liable.

      Lynne

      Delete
  4. Do you have to get a clearance certificate if there is no money in the estate or any property or assets to sell. There is more debt then anything and still owes Revenue Canada $3,600, credit cards have been written off, sold personal belongings for about $360 - doesn't even cover my costs

    ReplyDelete
  5. Do you have to get a clearance certificate if there is no money in the estate or any property or assets to sell. There is more debt then anything and still owes Revenue Canada $3,600, credit cards have been written off, sold personal belongings for about $360 - doesn't even cover my costs

    ReplyDelete
    Replies
    1. If there is still tax owing to Canada Revenue Agency, you can't get a clearance certificate. The certificate is only issued once all taxes are paid.

      Lynne

      Delete
  6. Why does it take so long for the Clearance Certificate take so long to come back when the tax return was sent and returned with-in 4 weeks. they tell us the Certificate could take anywhere from 8 months to 2 years to get. Why not sent it back the same time they sent the taxes back

    ReplyDelete
    Replies
    1. I know, right? It takes forever to get them, and I honestly don't know why it takes so long.

      Lynne

      Delete
  7. This comment has been removed by the author.

    ReplyDelete
  8. Hello Lynne,

    I am 1 of 4 beneficiaries of my father's estate. My question is about an Interim Distribution Release form that was sent out. All 4 beneficiaries were sent an Interim Distribution release form and a Statement of Account a couple of months ago from the estate's lawyer. I asked for clarification on something and yesterday I received my answers as well as a Revised Statement of Accounts and Release form. The amount of the Interim Distribution is less because the Executor' fees are much higher now. I have been in contact with one other beneficiary and they have not yet signed the original Release or even received the new Revised Statement of Accounts.

    My question is should all of the beneficiaries receive the new Revised paperwork or is it okay for them only have the original Statement of Accounts?

    ReplyDelete
    Replies
    1. They should all receive the new one, since they are all going to be part of the same distribution based on the same numbers.

      Lynne

      Delete
  9. i am on odsp -my mother passed two months ago and without her help legally with odsp i have not been able to make the bills or buy food etc Can i get am emergency interim distribution to tide me over scared and afraid of no money at all right now not even to park at the local hospital---pretty frightening as she neglected to set anything up for me financially till probate is done

    ReplyDelete
    Replies
    1. That certainly does sound like a scary situation for you. I really hope the executor doesn't delay getting probate.

      An interim distribution is normally not a problem. An executor normally has the discretion to make an interim distribution if circumstances warrant it, and in your case it sounds as if they do.

      The only thing that might make it difficult for the executor is that your inheritance may well be held in a trust, as opposed to be given to you outright. I'm assuming that because you said you are on ODSP. Usually a parent will set up a will with a Henson Trust to try not to get the beneficiary (in this case, you) bumped off the ODSP benefits. Obviously I can't say for sure that this is what your mother did, since I haven't seen the will. Assuming she did set up a Henson Trust, the executor WILL be able to access some trust funds to give to you on an interim basis.

      The amount that ODSP allows you to have before losing your benefits is pretty small. I don't work in Ontario but I believe the amount is $5,000. If you get more than that in a lump sum from the estate, you may well lose your benefits, so work with the executor to agree on an amount that will see you through but won't cause trouble with your benefits.

      I hope that you and the executor get along well so that you can simply make an informal request for an interim distribution and not have to go through lawyers or anything like that.

      Best of luck,
      Lynne

      Delete
    2. ODSP allows inheritences to be held in an account directly accessible by the disability pensioner (and needs one other person accessing) up to 100k> with 6k spendable every year. which odsp workers will recomend a monthly stipend out of the estate of $400-500 a month, which must be reported upon withdrawl. tho there is no rule on how you spend the 6k yearly except you cannot give it away, you must only spend it on yourself.

      the rules change in september 2017, allowing up to 10k withdrawn a year and up from $5k in personal accounts to $40k.

      you just need to contact nad work with your worker in advance on getting things set up under the clearly very confusing and not well spelled out publicly/online rules for ODSP.

      Delete
  10. Does it take six months for a government clearance certificate or do they sometimes come earlier

    ReplyDelete
    Replies
    1. They do sometimes come earlier. A reader left me a note yesterday saying that hers had arrived within 3 months. I usually seem to see them at around the 6 month mark.

      Lynne

      Delete
  11. My mothers final taxes are complete all taxes owed are paid NOA has been received.There was no property she went through bankrupty proceedings 4 yrs ago.I had power of attorney throughout the last couple years of her life.There only $1,000 in the estate account to be distributed between my sister and I.Do I have to bother asking for a clearance certificate?

    ReplyDelete
  12. I know my mother did not have any debt,her taxes are done and NOA received,taxes are paid.She went through bankruptcy proceedings a couple years before her death.I was POA throughout the bankrupcy and continued until her death,do I need to worry about a clearance certificate.If I don't apply for one what does CRA do?

    ReplyDelete
    Replies
    1. You are not required to get a clearance certificate and if you don't apply for one, CRA will not force you to get one. Most executors ask for them because they want the official okay that there are no more taxes out there for the estate. This offers them the protection of knowing they've covered everything. If an executor distributes an estate to the beneficiaries without having paid all of the taxes, the executor may be personally liable for those taxes, so most executors like the reassurance that won't happen.

      In your case, it sounds as if you are very familiar with your mother's finances, and you may feel confident that you've covered everything. If you're her executor, it's your call.

      Lynne

      Delete
  13. Thank You Lynne, good to know just glad to be finished with everything.

    ReplyDelete
  14. Hello, Lynne.

    My mother passed last October. She was a U.S. citizen and living as a resident in Canada. Her Canadian accountant (who had done her taxes for the last few years, so he is familiar with all her accounts) is the one who drew up her will and is also the executor. Her U.S. checking account is under a family trust (none of her other assets are). My sister and I were staying in her house while she was passing. The day after she died the executor came in, took a brief look around, and only asked for her ID cards. I had been sorting through her paperwork, which he saw and didn't have an issue with. He allowed us to continue to stay in the house for another week to sort through her items (without his supervision), since we had both traveled from the States and it would have been cumbersome to have to come back again. Now, almost a year later, his office is saying they never found the trust paperwork in her house, which I did see when I was there. They told me they can't get a tax clearance certificate without it and the entire estate cannot be distributed, not just that one account. They are going to hire a U.S. lawyer to somehow try and remedy this, but where does the liability lie? Did he have a duty to ask for a copy of the trust when the will was originally drawn up, especially sine he was already aware of its existence? Or, at the least, shouldn't he have made sure he had everything he needed the day he came in before letting us continue to stay in the house, if by a slight chance it got misplaced by us? If so, should he pay the lawyer fees, not the estate?

    Thanks in advance for any advice or help you can offer!

    Sarah

    ReplyDelete
    Replies
    1. In my view, the accountant is responsible for this whole mess. For one thing, he should not have drawn up a will for a client. He's not a lawyer. He could lose his job for that, and possibly his accounting license.

      He obviously has no idea how to be an executor any more than he knows how to prepare a will. Yes, he should have searched the house for all relevant paperwork. That's what executors do. Now he has made a mess because of his own negligence.

      It seems to me that this idiot is just counting the dollars he thinks he's going to get as an executor fee. I suggest you hire a lawyer of your own. This guy needs to be stopped before he pulls this stuff on other families.

      Lynne

      Delete
  15. Can the government come after the estate once a clearance certificate has been issued and the estate has been closed?

    ReplyDelete
  16. Curious... Should an executer have to pay capital gains on property that was sold by a beneficiary of the will? Basically, dad passed, mom is the executer of the will however by name my dad left me property that I paid a lawyer to transfer the title to that I have now sold. Should my mom now have to pay capital gains on this property?

    ReplyDelete
    Replies
    1. Yes. The taxable transaction was the movement of the property from your father to the estate. The tax from that transaction is payable by your father's estate because it's on the capital growth of the asset during the time your father owned it. Your mom doesn't pay it personally, of course. She uses estate assets. If there are not enough assets in the estate then I would suggest that you pay the taxes from the sale of the property, since it should not have been transferred without taxes being paid.

      Lynne

      Delete
  17. Hi Lynne, Sadly, my 90 year old Mum passed away in a home in BC a couple of weeks ago, and now My sister and I, who are both the Executors and the Sole beneficiaries to her Will have to do the needful. My Dad passed on a few years before here, and all the estate passed to her. Lawyers etc took care of that and my Mum ended up in a BC Government run home in Richmond BC, which was very nice. She was under the care of the Public Trustee, and all her finances run by them for several years, until my sister was given a "Committee-Ship" and she ran my Mum's finances under the supervision of the PT. My Mum had no property, and all the assets had been gifted to us many years ago. What she has is income from pensions and a bank account with about $140K in it. We have all the paperwork for these and her taxes were paid every year. The Government took 80% of her net pension income for her care, the rest went into her bank account. She has no debts or credit cards. Since both my sister and I are living overseas now, we are wondering if we should appoint an agent to help us Execute her will (notarized etc) and estate. It seems fairly uncomplicated at the moment since both of us are in agreement on everything. Do you see any redflags or issues which could make this drag on for years? Please advise. Thanks, Trev

    ReplyDelete
  18. Hi,
    I have a question about the time length to obtain the tax clearance certificate. My aunt passed away in February 2016. I am one of three beneficiaries and a cousin is the executor. All the necessary documents and paperwork were sent to the CRA to get the certificate in January of 2017. About six to seven months later, the CRA notified the executor that my aunt had missed filing her taxes for 2013 and 2014. The accountant got the paperwork for these and sent it off to the CRA in November 2017. It's now March 2018 and we're still waiting for the clearance certificate. In this case, did we essentially go to the back of the line after it was discovered those two tax years were missed, and will we have to wait several more months to get the certificate? I can't seem to find any information about a scenario like this. Thank you

    ReplyDelete
    Replies
    1. It does take an incredibly long time, doesn't it? It is my understanding that you do NOT go to the end of the line again in this situation.

      I assume that the executor is refusing to distribute the estate before receiving the tax clearance, or you wouldn't be fretting about how long it's taking. At this point, the executor should have a really good idea of what is realistically needed to be held back for potential taxes and should have distributed the rest of the estate already. There is no need for an executor to hang on to the whole thing until tax clearance is received.

      Lynne

      Delete
    2. Hi Lynne,
      Thank you so much for your quick response! I kind of thought that we wouldn't have to wait an additional several months just because the CRA required additional paperwork. The executor did do a partial distribution of the estate, but also held back a significant amount while he waits for the certificate. My financial situation has been difficult for several reasons and I could really benefit from the remainder of the funds. Unfortunately the executor has been difficult when it comes to keeping the beneficiaries in the loop on the proceedings ever since my aunt passed away. He had full access to her home and belongings and sadly many heirlooms that I would have loved to keep were not there when I first was able to go in the house It will be nice when this is finally settled as its been just over 2 years now since she passed away

      Delete
    3. Hey there! I'm in a very similar situation/timeline. Have you by chance received your clearance certificate yet?

      Delete
  19. Hi Lynne
    I have another quick question regarding the tax clearance certificate. Is there a date on it, and, as a beneficiary, can I request a copy of it from the executor once it's been received?
    Thank you in advance

    ReplyDelete
  20. Hi..yes the certificate was finally received in mid April and the remaining funds dispersed shortly thereafter. However, I never got a breakdown of where everything went from the executor, which kind of leaves me wondering I was expecting the final payout to be much higher than it was.

    ReplyDelete
  21. My father just passed away and owes 10g to cra. He has been living with me for the past 8 years and has no estate,no rrsp no nothing. I have paid for the funeral costs and now closing his bank. Will the cra come for me (his son) for the 10g?

    ReplyDelete
    Replies
    1. You're not responsible for another person's debts, even if that person was your father. I assume that because he had no assets, he didn't leave a will and therefore there is nobody acting as executor. However, CRA will definitely be in touch with you to go over what your father did or didn't have. They may examine anything you owned jointly with him. They won't force you to pay something you don't owe, but at the same time they aren't going to just walk away from $10,000 without pretty thorough investigation.

      Lynne

      Delete
  22. Do you absolutely need an accountant to request the clearance certificate? They are charging an arm and a leg and as far as I can see the form is 1 page. In my case as sole beneficiary and a non-resident, I must request the certificate as I am selling her house. Another thing, I was quite shocked to be charged a Welcome tax when I transferred the deed from her name to the estates name, seems unfair!

    ReplyDelete
    Replies
    1. No, you can apply for the Clearance Certificate on your own. The application form is available on the CRA website.

      Lynne

      Delete
  23. I would like to know if executors sell a deceased property will the executors be charged taxes as they already have their own property.

    ReplyDelete
    Replies
    1. If the executors are selling something belonging to the deceased, it has absolutely nothing to do with what the executors personally own. I believe you are talking about capital gains tax that arises on the sale of a property that is not a principal residence. If the property being sold was the principal residence of the owner (the deceased) then it's not subject to capital gains tax. It doesn't matter if the executors own 10 houses because they aren't the owners of the one being sold.

      Lynne

      Delete
  24. Hello, Lynne!

    If there are two co-executors of an estate, can one apply for a tax clearance certificate without the consent of the other?

    Also, what happens if the CRA issues a clearance certificate, the estate is settled -- then, subsequently, new information comes to light which reveals that the deceased had been committing some sort of tax fraud against the government(e.g. double-dipping on HST refunds or pensions, evading income taxes, etc.). Can the CRA come after the estate executors (and /or beneficiaries)?

    ReplyDelete

You might also like

Related Posts with Thumbnails