All About Estates

CRA Keeps A-Knockin’ (and Can Come In)

Estate trustees be warned: you may be held personally liable for failure to pay the estate’s taxes and/or the tax arrears of the deceased. When estate trustees are advised of this fact by their lawyers, pains are taken to soften the blow. CRA tends to be more blunt.

Following the death of a taxpayer, CRA may write directly to the estate trustee setting out the amount of arrears owing and requesting information about the value of the estate at the time of death. This may be the first time the estate trustee becomes aware of the extent of the tax arrears, and the amount may come as a shock.

To drive home the seriousness of the situation, CRA usually follows up with a clear statement of the estate trustee’s potential personal liability for failure to pay the deceased’s and/or estate’s outstanding taxes. I will not presume to be able to summarize the legal basis of the estate trustee’s personal liability better than the CRA, so I will quote directly from one such letter:

Paragraph 159 (1) (a) of the “Income Tax Act” states that a legal representative of a taxpayer [i.e. the estate trustee] is jointly and severally liable with the taxpayer for payment of amounts payable under the Act by the taxpayer to the extent that the legal representative is, in the capacity of legal representative, in the possession or control of property of the taxpayer.

In accordance with subsection 159 (2) of the “Income Tax Act,” before disposing of all the property of the estate or the proceeds from selling the property, you must get a certificate that acknowledges that you paid all debts that the estate owed to the Crown.

Please let us know when you will pay the balance. If you do not remit the unpaid balance and you proceed with a distribution of the property without obtaining a clearance certificate, we may assess you under subsection 159 (3) of the “Income Tax Act,” for either the taxpayer’s tax debt or the value of the property distributed, whichever is less.

The good news is that the estate trustee is only liable for the payment of taxes up to the value of the estate on death. CRA will not look to the estate trustee to personally pay any shortfall if there were insufficient funds in the estate before any payments are made out of the estate.

With regards to the clearance certificate, the procedure for applying for one is relatively straightforward. However, it takes CRA several months to process the request. The delay between applying for and receiving the clearance certificate should be communicated to the beneficiaries, who may be eagerly awaiting their inheritance. There may be further delay if, after applying for the clearance certificate, CRA determines that taxes are still owing. For this reason, estate trustees are advised to hold back some funds in the estate until the clearance certificate is in hand.

Hallowe’en is still a month away, but I can think of few things scarier than receiving this letter from CRA. To help steady your nerves, check out my fellow bloggers’ posts on the personal liability of estate trustees and beneficiaries. Little Richard also has some words of wisdom.

About Gillian Fournie
Gillian is a lawyer with de VRIES LITIGATION LLP. Her practice focuses on the area of trusts and estates litigation. More of Gillian's blogs can be found at


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