Death is a traumatic time for friends and family.  The next of kin, legal representative or executor has the added responsibility of dealing with the deceased’s financial matters – including taxes.

Added stress is the last thing you want your loved ones to go through. For this reason, it’s essential to ensure that your wishes are clear and that you have the appropriate legal documents prepared before you pass.  Although this won’t remove the grief and stress your loved ones feel, it will help reduce the stress.

Today’s article will focus on the financial aspects, an overly simplified version of what may need to happen, as many people have more complicated situations.

Make it Easier on Your Loved Ones

Thinking about your death is never a pleasant idea.  

Unfortunately, it’s something we’re all going to do one day.  To make things easier on your next of kin, you should do the following:

1. Get your affairs in order.  We’d recommend the following:
   1. Make a list of all your bank accounts, investments, sources of income, other assets and debts.  Ensure the list tells your POA (Power of Attorney) or executor which institutions the items are with and provides vital details like account numbers and contact information.  Ensure your files are organized and accessible to your POA or executor.  (You should make a similar list for your prescriptions, health care providers and medical records, and communicate if you’re an organ donor.)
   2. Once you’ve made this list, you may find opportunities to simplify your affairs.  This is something everyone should consider regularly doing – sometimes less is more.  Suppose you have multiple bank accounts with several companies at different financial institutions or RRSPs/RRIFs. In that case, you should consider consolidating accounts and closing down inactive accounts to make your life easier – and make dealing with your affairs easier after you pass.
   3. Write down your wishes and instructions.  This sounds simple, but it’s something many people fail to do.  Providing instructions about what your loved ones should do will make it much easier for them to do it.  I’m preparing my death manual, so my loved ones have clear instructions on what to do and proceed when I die. 

2. Have an updated will or wills. You may need more than one will.  If you own property in different jurisdictions, you need a will that specifically addresses that situation.  A will from Ontario is not valid outside Ontario.  Similarly, suppose you have significant assets, such as a small business or income properties. In that case, a secondary will may be necessary to instruct on how things should be handled after you pass.  Your wills should name an executor, and you should discuss their responsibilities with them before appointing them in your will.  The executor will be responsible for resolving your matters after your death.

3. Have Powers of Attorney (POAs).  It’s a good idea to have two.  These can be important if something happens that leaves you incapacitated.
   1. POA for Health – This will allow your POA to make decisions about your healthcare should you be incapacitated to the point of being unable to make those decisions for yourself.  Before a person passes, they may have a long-term care situation or need to make decisions about their care.  Make sure the person you name as POA knows and understands your wishes.  This will make it easier for them to make decisions on your behalf.
   2. POA for Finances – This will allow your POA to speak with financial institutions about your situation, move funds to pay your bills, pay for your healthcare, and, eventually, pay for your funeral.  Without a POA for Financial Matters, banks and other financial institutions won’t even have the conversation, even with a family member.  They have to follow privacy laws and regulations.

4. Get compliant with your taxes. Besides not having a will, one of the most stressful things financially for your family will be filing your taxes for years. Make it easier for them; get caught up, and stay caught up on your tax filings.

What to Do When They Pass

For the purposes of this article, we’re focusing on CRA and taxes.  Different provinces have different guidelines, so you can do a Google Search for “What to do when somebody dies in Ontario” or “What to do when somebody dies in BC” or whatever your province is to get the official government guidance.

Getting Started

What to send the CRA

When someone passes, you should send the following to CRA:

1. A copy of the death certificate;
2. A copy of the will or other legal document showing the name of the legal representative of the deceased family member;
   1. Note that if no will exists and you are a family member of the deceased, you can use form RC552 (Appointing a Representative for a Deceased Person) to apply by sending the completed form to the Authorization Services Unit at the deceased’s tax centre.
3. A completed Request for the Canada Revenue Agency to update Records form. This form is included with the Information Sheet RC4111, What to Do Following a Death.
4. A completed authorization form for yourself and the accountant or other professionals you may need to work with.  This should ONLY be submitted if you want offline access only.  We recommend instead looking at the next section, registering for Represent a Client and gaining access to the deceased’s CRA account online.  It will make your life much, much easier.  To complete these steps, you will need their Social Insurance Number.
5. Notify Service Canada about the deceased’s date of death.  Call them at 1-800-622-6232 if you have trouble navigating the online options.

These should be mailed to the appropriate tax centre.  Confirm with the CRA website to determine the proper tax centre; find a CRA Address.

If possible, you should register for Represent a Client before sending this information.

When these notices are received, benefit payments will cease or, if appropriate, be transferred to the survivor.  This may include the GST/HST credit, the Canada Workers Benefit, and the Canada Child Benefit.

If a GST/HST credit is received by cheque after the person passes, return them to CRA, and payment will be issued to the estate.

If the Child Care Benefit payment was received by cheque, contact the CRA at 1-800-387-1193 and let them know the date of death.  The Child Care Benefit will usually be transferred to the surviving parent.  If both parents are deceased, the person responsible for the care and upbringing of the child will have to apply for benefit payments using form RC66 (Canada Child Benefits Application) or through My Account for Individuals.

You can also stop any automatic tax installment payments the deceased was making if those were set up ahead of time.  No further tax installments are required after a death.

What You Need to Do Next

As the legal representative for the departed, you’ll need to:

1. Register to Represent a Client with CRA.  This will allow you to view the CRA account for the deceased and see what records CRA has available.  This will guide you in understanding what needs to be filed to get the deceased’s tax affairs in order.
2. Get access to the deceased’s CRA account.  You’ll need to complete step 1 before you can do this.  
3. File all outstanding T1 Personal Tax Returns.  You may also need to file GST/HST returns and deal with payroll accounts if the individual was self-employed.
4. Ensure all taxes owing are paid.
5. Let the beneficiaries know which of the amounts they receive from the estate are taxable (If this situation applies).
6. Obtain a clearance certificate from CRA certifying that all amounts owing have been paid.

As the executor or administrator of the estate, you are entitled to compensation.  This should be reported on a T4 from the estate in most instances.

Due Dates

Generally, when someone passes, their taxes are due at the same time as everyone else’s, on April 30th.  However, if the deceased passed after October 31st, that deadline is extended to 6 months following the date of passing.  If the deceased was self-employed, the typical self-employment filing deadline of June 15th applies in most cases.

It is important to note that tax payments are still due April 30th.  If taxes are owing, it’s recommended that you pay them before April 30th, even if you haven’t filed the return yet.

Caring For Your Loved Ones

Someone dying is completely disruptive to the lives of their loved ones.  The best thing you can do to minimize their stress, from a tax and financial perspective, is to get your affairs in order. Communicate clearly with those who will handle your matters after passing, and keep up to date on your taxes to minimize the work they’ll have to do. 

When someone passes away, the tax return process can take quite some time.  In addition, it usually results in a much higher than normal tax burden, so paying installments or taxes owing on time is essential to the estate for the beneficiaries.

Dealing with death and dying is never a pleasant situation, so planning and communication are vital to easing the pain of your loved ones.