Before distributing all of an estate, our office recommends that an executor apply for a tax clearance certificate from Canada Revenue Agency. An executor is responsible for paying any debts owed by the estate, including taxes. The tax clearance certificate is clear evidence that all the taxes for an estate are paid in full and protects an executor from having to personally pay for any outstanding taxes owed by the estate.
Executors are not legally required to obtain a tax clearance certificate, but it is wise to do so and the application process is relatively straight forward. Executors do not automatically receive a tax clearance certificate and to get one you must apply to Canada Revenue Agency. If you used an accountant to assist with estate taxes, you may request that the accountant complete and send the application.
If you want to request a tax clearance certificate yourself, you will want to:
- Complete and file all the necessary tax returns for the estate.
- Receive the Notice of Assessments for returns filed.
- Fill out an application for the tax clearance certificate using Form TX19-16e.
- Include with your application a copy of the Will, all probate documents and a statement of proposed distribution.
It may take several months before you receive the tax clearance certificate. If you have beneficiaries who are anxious to receive their inheritance and the tax clearance certificate is taking a long time, you may consider doing an interim distribution while holding back enough money to pay for taxes or other unforeseen expenses.