Questions and answers about What to do when someone has died

Can I deduct funeral expenses, probate fees, or fees to administer the estate?

No. These are personal expenses and cannot be deducted.

Who reports a death benefit that an employer pays?

That depends on who received the death benefit. A death benefit is income of either the estate or the beneficiary who receives it. Up to $10,000 of the total of all death benefits paid (other than CPP or QPP death benefits) is not taxable. If the beneficiary received the death benefit, see line 13000 in the Federal Income Tax and Benefit Guide. If the estate received the death benefit, see the T4013, T3 Trust Guide.

On what return do I report Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) death benefits for the estate of the deceased?

The amount of the CPP or QPP death benefit is shown in box 18 of Form T4A(P), Statement of Canada Pension Plan Benefits. Do not report this amount on the final return for the deceased person.

If the CPP or QPP death benefit is payable to a beneficiary in the year it is received by the estate, a T3 slip will be issued in the beneficiary's name and the beneficiary will be required to include the amount on their T1 return. The estate does not have the option to elect to have the benefit taxed in the estate if the estate otherwise has taxable income.

If the CPP or QPP death benefit is not paid or made payable to a beneficiary in the year it is received by the estate, the amount will be included in the estate’s taxable income reported on its T3 Trust Income Tax and Information Return in the year it is received by the estate and the estate will pay tax on that amount.

Where the CPP or QPP death benefit is the only income of the estate and a T3 return is not otherwise required to be filed, the death benefit can be reported directly on the T1 return of the beneficiary.

Unlike a death benefit that an employer may pay to the estate or to a named beneficiary, the CPP or QPP benefit is not eligible for the $10,000 death benefit exemption. You have to report all other CPP or QPP benefits on the deceased's final return. For more information, see line 11400.

Who reports amounts an employer pays for vacation and unused sick leave?

Vacation pay is income of the deceased person and can be reported on a return for rights or things. Payment for unused sick leave is considered a death benefit and is income of the estate or beneficiary who receives it. For more information, see Interpretation Bulletin IT508R, Death Benefits.

The deceased had investments in a tax-free savings account (TFSA). Who reports any income earned in the TFSA?

When the holder of a deposit or an annuity contract under a TFSA dies, the holder is considered to have received, immediately before death, an amount equal to the fair market value (FMV) of all the property held in the TFSA at the time of death. As a result, no income should be reported by the deceased on the final return or any optional returns. After the holder's death, the annuity contract is no longer considered a TFSA and all earnings after the holder's death are taxable to the beneficiaries in the year they receive this income. For more information, see Guide RC4466, Tax-Free Savings Account (TFSA), Guide for Individuals.

If the deceased person was paying tax by instalments, do I have to continue making those instalment payments?

No. The only instalments the CRA requires are those that were due before the date of death but not paid.

Why do I have to return the deceased person's GST/HST credit?

Since the payments are an advance on purchases for the current calendar year, you have to return GST/HST credit payments that were paid to the deceased after their death. If the deceased was single and the estate is entitled to the payment, another payment will be issued to the estate. However, the payment that was issued to the deceased person must be returned to the CRA before the CRA reissues the payment to the estate. For more information, see What if the deceased was receiving the GST/HST credit.

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