# My friend's wife died and owes back taxes on income tax. Do I have to pay?



## recklessrick (Jun 16, 2013)

My friend's wife died suddenly at age 52. She owes (owed) around $80k in income tax from not paying it for a few years; she was self employed and for various reasons, chose not to pay income tax on parts of her income. Is my friend responsible for paying that income tax bill from his wife's past?

My friend does not have a job, his wife was the main earner and he stayed at home with their kids. 

I was doing some research and it seems like it depends on if they filed taxes jointly and could depend on if he can claim innocent spouse (might be a USA thing).

I'm thinking the best way to figure this out is for him to talk to an accountant? Would a lawyer be better? Any specific questions or information he should have at hand?

Thanks.


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## AltaRed (Jun 8, 2009)

There are Google links on this subject. One place to start is this Moneysense article. https://www.moneysense.ca/save/debt/when-your-dead-spouses-debt-is-your-debt/

FWIW, there is no such thing as filing jointly on income taxes in Canada. We file individual tax returns despite some tax credits being based on family income, the ability to combine medical expenses to lower income spouse, etc. So that is a red herring.

The key issue will be joint assets in which CRA as a preferred creditor can gain access too. If bank accounts were joint and the house is joint ownership, I believe CRA can capture all of those things (maybe not 100% of the house....not sure). That aside, CRA will be the preferred creditor on the wife's assets first (RRSP excepted, and maybe TFSA too) until there is no money left, and then I believe CRA will chase joint assets. Also, any loans your friend may have co-signed with his wife, he will also be responsible for.

I would suggest he talk to a good tax accountant first that deals in estates specifically. Their hourly rates are less than that of a lawyer. He needs to have a list of assets as he knows them, especially jointly owned assets and perhaps their approximate worth.


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## OptsyEagle (Nov 29, 2009)

recklessrick said:


> My friend's wife died suddenly at age 52. She owes (owed) around $80k in income tax from not paying it for a few years; she was self employed and for various reasons, chose not to pay income tax on parts of her income. Is my friend responsible for paying that income tax bill from his wife's past?
> 
> My friend does not have a job, his wife was the main earner and he stayed at home with their kids.
> 
> ...


These are definitely questions that a lawyer would answer better, but if she owed that money then CRA is one of her creditors. If he inherited any assets, even if they were assets that were owned jointly and did not follow the will, I would suspect CRA would take a position ahead of your friend. 

If there is literally nothing, then I doubt CRA would attempt to get blood from a stone, but they probably would expect your friend to prove it to them.

I doubt highly that your friend did not know what his wife was up to and even if he didn't he most likely benefited from avoidance of their obligations and hence I doubt you will find much sympathy with CRA on this matter.

All this is just my opinion of course. A tax lawyers opinion would be better.


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## recklessrick (Jun 16, 2013)

Thank you for the info, this will help us get started.


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## AltaRed (Jun 8, 2009)

A few additional links... Note the sequence in an insolvent estate may vary a bit by province. You have not said whether the wife's estate will be insolvent or not... so I am speculating it is based on 'fear of having to pay wife's income tax bill'. Note that if there are plenty of assets in wife's estate to cover the income tax bill, then yes indeed, the back taxes will have to be paid before beneficiaries (other than RRSP) get disbursements.

https://www.lerners.ca/lernx/who-gets-paid-in-an-insolvent-estate/
https://www.advisor.ca/tax/estate-planning/how-to-deal-with-an-insolvent-estate/
https://www.advisor.ca/tax/estate-planning/how-and-when-to-pay-estate-debts/


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## gaspr (Mar 24, 2014)

Perhaps the husband could talk to a "Licenced Insolvency Trustee" for a free consultation. The price is right and he should get some good advice...


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## AltaRed (Jun 8, 2009)

It would be helpful if the OP could advise us whether this is indeed an insolvent estate (or not).


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## gaspr (Mar 24, 2014)

AltaRed said:


> It would be helpful if the OP could advise us whether this is indeed an insolvent estate (or not).


That is true. But maybe the best time to get some good advice is before it becomes an insolvency. Sometimes a consumer proposal can be a solution, especially when the CRA is involved.

Edited to add the following link:

https://www.hoyes.com/debt-relief/tax-debt/


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## AltaRed (Jun 8, 2009)

gaspr said:


> That is true. But maybe the best time to get some good advice is before it becomes an insolvency. Sometimes a consumer proposal can be a solution, especially when the CRA is involved.


This is the wife's estate. Her estate is now frozen and it is either insolvent or it is not. The executor needs to figure that out with an inventory list. Most FIs have them. One sample is https://www.bmo.com/estate/Executors Inventory Workbook - English.pdf

Someone else with more experience than I can comment about JTWROS assets. Do the remaining owners get ownership of those assets outright? Or if the estate is insolvent, do creditors have first dibs on JTWROS assets? The OP has not clarified any of these key estate points yet - only came to CMF with a focus on the outstanding tax debt to CRA.


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## lonewolf :) (Sep 13, 2016)

Why even spend the money for an accountant or lawyer phone revenue Canada & ask how to proceed.


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## AltaRed (Jun 8, 2009)

lonewolf :) said:


> Why even spend the money for an accountant or lawyer phone revenue Canada & ask how to proceed.


Except most agents don't provide accurate data, especially in situations like this. The OP's friend better phone 3 different times and see if one gets the same answer. 

This is not really a difficult set of logical questions... 

1. First of all, no, a spouse is not responsible for the income tax debt of a spouse (the first question) but CRA can chase down the estate for back taxes and is a creditor.
2. The executor needs to sort out whether the estate is solvent or not. If solvent where assets exceed liabilities, CRA will obviously get paid. If insolvent, CRA will line up with other creditors in a sequence as I pointed out in some of the links.
3. The individual needs tax advice on whether creditors can chase down JTWROS assets, and how much percentage of those JTWROS assets, or does the surviving spouse have first dibs on JTWROS assets before creditors come calling. This is the only question from my perspective that needs an early answer. An estate lawyer might have to answer that question (beyond my pay grade).


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