Did the deceased suffer from a severe and prolonged impairment? If so, there may some tax relief for the estate in the form of a Disability Tax Credit.

If a deceased taxpayer had a mental or physical impairment for any period time prior to and/or in the year of death, a Disability Tax Credit (“DTC”) may be available for the terminal return (or on the supporting spouse’s return) and possibly for prior years’ returns filed depending on the length of illness. To qualify, a DTC Form T2201 must be completed and properly signed by the doctor who was the primary caregiver to the deceased.

Under normal circumstances, CRA will accept a Form T2201 even it is completed and signed after the date of death, as long as the disability was severe and prolonged. In most terminal returns, for example, CRA has accepted the DTC unless the circumstances are unusual such as a suicide or accidental death. With appropriate documentation, the DTC may also be accepted by CRA for prior years if the DTC had not been claimed previously.

So if you know the deceased was truly incapacitated for any period of time prior to death, the filing of a DTC with the terminal return and possibly prior years’ returns should be investigated to obtain some tax relief for the estate.

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