One of the responsibilities of an executor is to deal with the final tax return of the deceased and file the tax returns for the estate.  Most tax deadlines are statutory (established in the Income Tax Act) therefore, they are non-negotiable.  The executor should consult a tax advisor early to learn of all tax deadlines relevant to the estate.  The following will provide some guidance:

Final T1 of the Deceased:

The executor should be aware the deadline for submitting the final tax return of the deceased (also referred to as the “terminal return”) is:

• April 30^th following the year of death for deaths occurring between January 1^st and October 31^st, and
• Six (6) months from the date of death for deaths occurring between November 1^st and December 31st.
• The final tax return for a deceased who was self-employed (or whose spouse or common law partner was self-employed) is:
  • June 15^th of the following year, or
  • If the death is after December 15^th, six (6) months from the date of death.

You can appreciate why an executor needs to seek advice early.

Rights or Things

For a deceased that has income arising from “rights or things”, an election can be made for the income to be included in a separate tax return that deals exclusively with this specific income (hereinafter referred as a “rights or things return“).

What is a right or thing?  The Income Tax Act does not define a “right or thing.” I would suggest a right or thing is an unrealized amount of income of the deceased as it was never received yet, the deceased had a right at death to receive it.  Examples may include unpaid dividends declared prior to death, work in progress for professionals, OAS and CPP benefits that were due and payable before the date of death, etc.

These separate rights or things return will strictly include the deemed income equal to the value of the “rights or things”.  The election for this separate return must be made by the later of:

• The day that is one year after the date of death of the deceased, and
• 90 days after the date of the notice of assessment of deceased’s terminal return.

If the right or thing has been distributed or transferred to a beneficiary, that person may, by election, report the applicable income instead of the deceased.

I must point out that income derived from a right or thing cannot be reported by the estate itself.

This “rights or things return” is something that is very rarely claimed – probably because the majority of estate advisors are unaware of this option.

Estate Tax Return & Graduated Rate Estate (“GRE”) Status:

As for the estate, the executor must submit the initial T3 Trust Income Tax and Information Return (“T3 return) of the estate within 90 days following the one (1) year anniversary of the date of death of the deceased.

The executor also has an opportunity, when filing the initial T3 return, to qualify the estate as a graduated rate estate (GRE).  To qualify as a GRE, the executor must make the appropriate designation in the initial T3 return (see first box on the left at the top of page 2 of the T3 return).

The executor must make sure the designation is entered on the initial T3 return otherwise, any tax benefits afforded to a GRE would be unavailable.

U.S. Estate Tax Return

If the deceased was a U.S. citizen or a Canadian citizen with more than $60,000 of U.S. situs assets (as an example, owned U.S. real estate or U.S. publicly traded securities), the executor must submit a U.S. estate tax return to the Internal Revenue Service (IRS).

The deadline to file the U.S. estate tax return is:

• Within nine (9) months from the date of death, however
• An extension can be filed granting another six (6) months to the deadline.

Essentially, the U.S. estate tax return must be filed within fifteen (15) months from the date of death.

Conclusion

Tax deadlines are key to a proper administration of an estate.  Most executors will turn to their estate advisor for assistance and this information may lay a solid foundation to the professional relationship.