# Wills, estates and the final return

> The tax side of a death: who files the final return and when, why property is treated as sold, what happens to an RRSP, and the clearance certificate.

- Web page: https://taxnotes.ca/guides/wills-and-estates/
- For: Everyone · Topic: Planning
- Last reviewed: 2026-10-10

When someone dies, their legal representative, usually the executor named in the will, files a final tax return and settles what's owed to the CRA before handing out the estate. Who receives the property matters: what goes to a surviving spouse or common-law partner is often taxed later, not on the final return.

## Who deals with the CRA

The **legal representative** is responsible for the estate's tax affairs. Typically that's the executor named in the will; in Quebec, it's the registered liquidator of the estate. If there's no will or no executor, someone may need to apply to the courts under the province's or territory's estate law. While that's pending, a person can ask to be registered as the representative for CRA purposes only, using Form RC552.

The legal representative needs to tell the CRA about the death and about their role (sending a copy of the death certificate and the will or other document naming them), stop or transfer benefit payments such as the Canada child benefit, file the returns for the year of death and any earlier years not yet filed, and pay what's owing before distributing the estate.

## The final return and its due date

A final return is required for everyone who dies. It reports income for the year up to the date of death, plus any increase in the value of the person's property, and claims their credits and deductions.

The final return is due, and any balance must be paid, by:

- **April 30 of the following year** if the person died between January 1 and October 31
- **6 months after the date of death** if they died between November 1 and December 31

A different filing date can apply if the person or their spouse or common-law partner ran a business. If the person died early in the year before filing the previous year's return, that return is due 6 months after the date of death. No further instalments are needed after the date of death.

If a return is late and there's a balance owing, the penalty is 5% of the balance plus 1% for each full month it's late, up to 12 months, and interest compounds daily on unpaid amounts. Filing on time avoids the penalty even if you can't pay in full.

The legal representative may also be able to file up to three **optional returns**, such as a return for "rights or things" (income earned but not yet paid at death, like unpaid salary). These can reduce the total tax because some credits can be claimed more than once. Income earned after the death that isn't paid out to beneficiaries may need to be reported on a T3 trust return for the estate.

## Property is treated as sold at death

Just before death, the person is considered to have sold all their capital property, such as real estate, investments and valuable belongings, at fair market value. This **deemed disposition** can create a capital gain or loss on the final return, reported on Schedule 3, even though nothing was actually sold.

There are important exceptions:

- **Spouse or common-law partner.** Property left to a surviving spouse or common-law partner resident in Canada, or to a qualifying spousal trust, can pass without tax on the final return. The gain is postponed until the survivor sells the property or is considered to have sold it. The property generally has to become locked in for the survivor within 36 months of the death. The legal representative can choose, property by property, to report the gain anyway.
- **Principal residence.** A gain on the person's home may be fully or partly exempt. Even if the whole gain is exempt, the legal representative has to designate the home on the final return, using Schedule 3 and Form T1255. That isn't needed if the home passes to the surviving spouse or common-law partner. See [The principal residence exemption](https://taxnotes.ca/guides/principal-residence-exemption/).

## RRSPs

For an RRSP that hasn't started paying a retirement income, the general rule is that its full fair market value at death goes into the person's income for the year of death.

If everything in the plan goes to the surviving spouse or common-law partner and is transferred directly into their own RRSP or RRIF, or used to buy them an eligible annuity, by the end of the year after the death, the survivor reports it and claims an offsetting deduction instead. A similar rollover can go to the RDSP of a financially dependent child or grandchild with a disability.

Any Home Buyers' Plan balance still to be repaid is also included in income on the final return, unless the surviving spouse or common-law partner agrees to continue the repayments.

## Get a clearance certificate before distributing

A clearance certificate confirms that the estate has paid, or secured, all income tax, GST/HST, interest and penalties owing. If the legal representative distributes assets without one and tax turns out to be owing, they can be personally liable, up to the value of what they distributed.

Apply only after the returns are filed and assessed and the balances are paid. The CRA says it acknowledges a request within 45 days, and its review can take up to 120 days.

Estates with a business, rental property or large gains get complicated quickly; this is one situation where a professional's help is worth considering.

## Sources

1. [Represent someone who died](https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/represent-deceased.html) (canada.ca)
2. [What returns you need to file (someone who died)](https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/prepare-returns/what-to-file.html) (canada.ca)
3. [Filing and payment due dates (someone who died)](https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/prepare-returns/filing-deadlines.html) (canada.ca)
4. [Taxable capital gains on property, investments, and belongings (someone who died)](https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/prepare-returns/report-income/capital-gains.html) (canada.ca)
5. [RRSP (someone who died)](https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/prepare-returns/report-income/rrsp.html) (canada.ca)
6. [Apply for a clearance certificate](https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/clearance-certificate.html) (canada.ca)

Tax figures in this guide come from the TaxNotes.ca rates tables (https://taxnotes.ca/rates/), which cite the Canada Revenue Agency and, for Quebec, Revenu Québec.

Last reviewed: October 10, 2026

How to cite: "Wills, estates and the final return", TaxNotes.ca, last reviewed 2026-10-10, https://taxnotes.ca/guides/wills-and-estates/. For a figure or rule, also cite the official source listed above.

Licence: CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). Free to share and adapt with attribution: https://taxnotes.ca/reproducing-our-content/