For most Estate Trustees, their income tax filings will include a Terminal T1 return for the year of death of the Testator, and an estate return for any income earned by the estate after death. It may also include a T1 for the year(s) prior to death, if the deceased did not file during their lifetime.
Terminal tax returns are those filed on behalf of a deceased taxpayer. In the normal course, their due date remains April 30, 2020, just like any individual tax return. However, if the deceased died in the months of November or December, the return is due six months after the date of death.
Canada Revenue Agency (CRA) has made recent announcements extending the timeline for individual returns to June 1, 2020 to account for the global pandemic. However, the available information from CRA does not clearly set out the timelines with respect to Terminal tax returns. Absent more clear direction from the CRA, it may be prudent for Estate Trustees to file the Terminal Return in accordance with the old timelines. For any Estate Trustees considering the issue, please consult an accountant for the most up-to-date deadlines and notices from the CRA and seek advice on your tax filing obligations.
Estate Administration Tax
Estate Trustees are also responsible for Estate Administration Tax for any estate that requires a Certificate of Appointment of Estate Trustee (formerly called “probate”). When making the application to the court, the Estate Trustee must include a date of death value of all of the assets of the estate and pay the Estate Administration Tax, calculated as follows: Zero dollars on the first $50,000.00 of the estate and 1.5% on the value of estate assets over $50,000.00.
Once the Certificate of Appointment of Estate Trustee is granted, the Estate Trustee must file an Estate Information Return (“EIR”) with the Minister of Finance no later than 180 days after the Certificate is granted. The EIR provides detailed information on the assets of the estate and confirms that all Estate Administration Tax is paid.
Due to COVID-19 and related court closures, applications for a Certificate of Appointment of Estate Trustee are not currently being accepted or issued by most courts in Ontario. We are, however, working with our clients to gather the necessary information and prepare the documents so that we are in a position to submit our applications once we are able to do so. In addition, for any Certificates received prior to the closure, we are working with our clients to assist in moving forward with the administration and the various tasks involved in acting as Estate Trustee, including filing of the Estate Information Return.