All About Estates

Estate income entitlement

With the filing deadline for trust tax returns fast approaching, it is a good idea to take a look at some recent tax news which may be of some interest to executors. The Canada Revenue Agency (CRA) was recently asked their view on whether a beneficiary of an estate has the right to income of an estate after the estate has passed the end of the “executor’s year” such that the beneficiaries may possess the legal right to enforce payments from the estate.

The CRA affirmed its view that an amount is deemed not to have become payable to a beneficiary in the year unless either the amount was actually paid to the beneficiary in the year or the beneficiary was entitled in the year to enforce payment of it.  Generally speaking, executors are permitted a year from the date of the death (often referred to as the “executor’s year”) to administer an estate, during which time the right to income of the estate is unenforceable by a beneficiary.  After this time, it is a question of fact as to whether the executor is able to distribute property and whether the income of the estate is payable to the beneficiaries.

It follows that an entitlement in an estate would not in and of itself result in the income of the estate being automatically payable to the beneficiaries. The executor and the beneficiaries would instead have to determine whether the executor has complied with the terms of the will as a whole and any laws affecting the administration of the estate.

Contributed by Talwinder Singh, Tax Manager RSM Canada

About Derek de Gannes
Derek A. de Gannes: Senior Director, Business Tax of RSM Canada. RSM Canada is committed to the highest level of integrity, quality and professionalism and provides clients with solutions in the area of Audit, Tax and Transaction Services. Email: derek.degannes@rsmcanada.com

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