Prepare tax returns for someone who died
Death benefits
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CPP/QPP death benefit
The CPP or QPP death benefit is a one-time, lump-sum payment generally made to the estate upon the death of a CPP or QPP contributor. Do not report CPP or QPP death benefits on the Final Return of the person who died.
The CPP or QPP death benefit amount is generally reported by the estate of the person who died on a T3 Trust Income Tax and Information Return (T3 Return) or by the beneficiary of the person’s estate on their T1 Income Tax and Benefit Return (T1 Return), depending on who ultimately receives it as described below.
Unlike the death benefit that an employer may pay to an estate, or to a named beneficiary, the CPP or QPP death benefit is not eligible for the $10,000 death benefit exemption.
Determine who received the CPP/QPP death benefit
Did the estate of the person who died receive the CPP/QPP death benefit?
Yes and it is the only income of the estate
- Found on slip
- T4A(P), Statement of Canada Pension Plan Benefits
- Report on line
- 13000 of the beneficiary's T1 Return
If the CPP/QPP death benefit amount is the only income of the estate and a T3 Return is not otherwise required to be filed, the beneficiary of the estate will report the amount directly on their T1 Return for the year the amount was received.
Yes and it is not the only income of the estate
- Found on slip
- T4A(P), Statement of Canada Pension Plan Benefits
- Report on line
- 11 of the estate’s T3 Return
13000 of the beneficiary’s T1 Return, if it is paid or made payable to a beneficiary
The CPP/QPP death benefit amount received by the estate must be reported on line 11 of the T3 Return in the year it is received, and the estate will pay tax on that amount. The estate can deduct the amount from income if it is paid or made payable to a beneficiary of the estate in the same year the estate receives it.
Deduct the CPP/QPP death benefit from income of the estate and report it as income of the beneficiary
If the CPP/QPP death benefit amount is paid or made payable to a beneficiary of the estate in the year that it was received by the estate, report the amount on line 926 of Schedule 9, Income Allocations and Designations to Beneficiaries and deduct the same amount on line 26 of the T3 Return.
The legal representative is required to prepare and issue a Statement of Trust Income Allocations and Designations (T3 slip) in the beneficiary's name, for the amount payable to the beneficiary in the year, and the beneficiary will be required to include the amount on line 13000 of their T1 Return.
No, someone else received the death benefit
- Found on slip
- T4A(P), Statement of Canada Pension Plan Benefits
- Report on line
- 13000 of the recipient’s T1 Return
If someone applied for and directly received the CPP/QPP death benefit, they will receive a T4A(P) slip (Statement of Canada Pension Plan Benefits) and are required to report the amount received on their T1 Return for the year of receipt. It is not reported as part of the Final Return of the person who died.
Not taxable in certain circumstances
A CPP/QPP death benefit will generally not be taxable if the recipient is not the estate or a beneficiary of the estate, and all of the following circumstances apply:
- The taxpayer who received the death benefit paid the deceased's funeral expenses
- The amount of the death benefit is not more than the funeral expenses
- The deceased has no heirs, and there is no other property in the estate
Death benefit from an employer
A death benefit from an employer is the total amount received on or after the death of an employee or former employee in recognition of their service in an office or employment.
Up to $10,000 of the total of all employer death benefits received is exempt from being taxed. The $10,000 exempt amount is the maximum that may be applied to the total of the death benefit amounts received in respect of a deceased employee from all employers, across all years, by all recipients.
Generally, amounts received over the first $10,000 will be reported as income of the recipient on their tax return, whether that recipient is the estate of the person who died, or someone else. Do not report death benefit amounts on the Final Return of the person who died.
An amount received from a trust fund set up by the employer may qualify as a death benefit.
Determine how much of the benefit received is taxable
Was the total death benefit paid less than $10,000?
Yes, the total of all amounts received (by all recipients) is $10,000 or less
- Found on slip
- Box 106 of the T4A, Statement of Pension, Retirement, Annuity, and Other Income, or box 26 of the T3 slip
Up to $10,000 of the total of all death benefits from employers paid to recipients is not taxable and does not need to be reported. The $10,000 exempt amount is the maximum that may be applied to the total of the death benefit amounts received in respect of a deceased employee from all employers, across all years, by all recipients.
This only applies to death benefits from employers; it does not apply to CPP/QPP death benefits.
No, the recipients received more than $10,000 in total
- Found on slip
- Box 106 of the T4A, Statement of Pension, Retirement, Annuity, and Other Income
- Report on line
- Recipient is the estate (or a trust): 11 of a T3 Trust Income tax and Information Return (T3 Return)
Recipient is someone other than the estate (or trust): 13000 of a T1 Income Tax and Benefit Return (T1 Return)
The total of all death benefit amounts received in excess of $10,000 is taxable and must be reported. Do not report death benefit amounts on the Final Return of the person who died.
If the recipient is the estate of the deceased or another trust
If the estate or trust allocates an amount to beneficiaries, refer to Deduct the amount from income of a trust and report it as income of the beneficiary.
If an amount is taxed in the estate, the total amount received in excess of $10,000 must be reported by the estate or trust on line 11 of the T3 Return for the year of receipt.
If the recipient is an individual and not a trust
The amount received in excess of the exempt portion ($10,000 if they are the sole recipient) must be reported on line 13000 of their T1 Return for the year of receipt.
If there are multiple recipients
If more than one recipient received a death benefit, the tax exempt portion of the total of all the amounts received cannot exceed $10,000. For further detail on how to calculate exemptions across multiple beneficiaries, refer to archived bulletin IT508R, Death Benefits.
If more than one employer pays death benefits
If more than one employer pays death benefits, the tax exempt portion of the total of all the amounts received cannot exceed $10,000. The total of all death benefits received in excess of $10,000 must be reported.
Deduct the amount from income of a trust and report it as income of the beneficiary
The death benefit from an employer may be deducted from the estate’s income if it is paid or made payable (according to the provisions of the will) to a beneficiary of the estate in the year it was received by the estate.
The beneficiary must report the amount as income on their T1 Return if it is deducted from income of the estate.
A Graduated Rate Estate (GRE) may use one of the following methods to deduct the death benefit from income of the estate and report it as income of the beneficiary. A testamentary trust that is not a GRE may only use Method 2.
Method 1: Beneficiaries apply the $10,000 exemption (GRE only)
Where the death benefit is allocated to the beneficiaries of a GRE in accordance with the provisions of the will:
- Report the total death benefit amount (including the first $10,000) on line 11 of the T3 Return
- Report the allocated amount on line 926 of Schedule 9
- Deduct the allocated amount on line 26 of the T3 Return
- Enter the allocated amount from line 926 that is eligible for the $10,000 exclusion on line 935 of Schedule 9
The legal representative is required to prepare and issue a Statement of Trust Income Allocations and Designations (T3 slip) in the beneficiary's name, for the amount paid or made payable to the beneficiary in the year, and the beneficiary will be required to include the amount in excess of their share of the $10,000 exempt portion on line 13000 of their T1 Return. Refer to boxes 26 and 35 on How to complete the T3 slip.
Where the death benefit is allocated to more than one beneficiary, split the amount eligible for this exclusion among those beneficiaries. The total eligible amount that is split cannot exceed $10,000. The beneficiaries can use this information to calculate the taxable portion that they have to report on their T1 Return. For further detail on how to calculate exemptions across multiple beneficiaries, refer to archived bulletin IT508R, Death Benefits.
Method 2: The trust applies the $10,000 exemption
Where the death benefit is included in the income of the testamentary trust (including a GRE):
- Up to the first $10,000 may be excluded from the amount reported on line 11 of the T3 Return
- A deduction may be claimed on line 26 of the T3 Return for the amount in excess of $10,000 that is paid or made payable to one or more beneficiaries (in accordance with the provisions of the will) in the year it was received by the estate
- Report the deducted amount on line 926 of Schedule 9 of the T3 Return
The legal representative is required to prepare and issue a Statement of Trust Income Allocations and Designations (T3 slip) in the beneficiary's name, for the excess amount payable to the beneficiary in the year, and the beneficiary will be required to include the amount on line 13000 of their T1 Return. Refer to box 26 on How to complete the T3 slip.
Death benefit from group term insurance
Group term insurance, such as the federal government's supplementary death benefit is not reported on the deceased's T1 Return or on the estate's T3 Return.
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