# Can adult children be liable with CRA



## ventingspleen (Aug 25, 2016)

Suppose my father got tax benfits for many years that he was not entitled to, but before he passed away in 2015, he made me power of attorney and transferred all his money to me, avoiding probate. So, say then after his death, the CRA discovers the he had received thousands of dollars that he clearly was not entitled to due to errors on his part, can the CRA come after me?


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## Numbersman61 (Jan 26, 2015)

ventingspleen said:


> Suppose my father got tax benfits for many years that he was not entitled to, but before he passed away in 2015, he made me power of attorney and transferred all his money to me, avoiding probate. So, say then after his death, the CRA discovers the he had received thousands of dollars that he clearly was not entitled to due to errors on his part, can the CRA come after me?


My answer is they possibly could using section 160 of the Income Tax Act. Howver, they have to prove that when the gift was made, he owed the CRA money. This where it gets tricky. If they don't discover that extra tax was owing before the years in question are still open for re-assessment, I don't see how they can claim he owed the tax unless they use the gross negligence provisions which allows them to go back extra years. By now, you have likely filed the final tax return for him. If the CRA notices some issues when reviewing that return, it may trigger a review of the prior returns. In any event, I recommend keeping the amount you feel may be owing in a savings account for a few years so that you are in a position to pay the tax bill if it ever shows up. 
numerous articles on section 160 problems - just do a google search.


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## ventingspleen (Aug 25, 2016)

That is a good point - Section 160. And it has some interesting interpretations. One case I read is that they consider the deposit of funds into another person's account constitutes a transfer of property.

And then they could argue that although someone didn't have an official tax debt, they had an expected tax debt because they knew that they got tax benefits they weren't entitled to. So, they could and likely might argue some sort of fraud in the transfer of assets.


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## carverman (Nov 8, 2010)

ventingspleen said:


> Suppose my father got tax benfits for many years that he was not entitled to, *but before he passed away in 2015, he made me power of attorney and transferred all his money to me, avoiding probate*. So, say then after his death, the CRA discovers the he had received thousands of dollars that he clearly was not entitled to due to errors on his part, can the CRA come after me?


 Interesting case. 
You DO realize that the POA becomes NULL and Void one minute after his death, so unless he also named and appointed you as executor and/or trustee of his estate according to his will, (did he make a will?)... or he just transfer his assets to you while he was alive?.... the executor may still be liable. 

But if he avoided probate, it is a more difficult question. 
http://www.banksandstarkman.com/Publications/Avoiding-Probate.shtml



> By doing so, the assets will pass on directly to a beneficiary when they die without attracting a hefty probate fee. Note that for this strategy to operate, joint ownership must be in the form of joint tenancy, which has the right of survivorship, rather than tenancy-in-common, which does not.
> 
> However, transferring ownership could have a number of consequences.
> 
> ...


Unless you are the legal executor named in his will, CRA may have a hard time going after you, and whatever money that they think your late father's estate owes to the taxman for benefits he wasn't entitled to.
This would be the time to contact a good tax lawyer (free 1/2 hr consultation?) may help.

If the estate has already been distributed by an executor/trustee, and the final return for the estate of the late father has been filed , his estate may still be liable to repay any benefits that he was not entitled to....but if the estate has no money and you are NOT the executor/administrator, I really can't see how they can come after you to pay his outstanding taxes or benefit debts, IMO.

Here is some better info on this subject from the Ontario Probate court:

*See Estate Liabilities and Executor Liabilities* (section)
http://ontario-probate.ca/executor-role/


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## Alan90 (Jun 3, 2016)

If you are the executor, the you should request a clearance certificate from the CRA after filing the final return for the deceased.


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## twa2w (Mar 5, 2016)

Yep, I agree that section 160 certainly applies in the OP 's case. 
Did your father know he was getting benefits he was not entitled to? Or did you learn of this when you reviewed his affairs or did his ginsl tax return.
Has CRA found out about the the benefits he was receiving?
Were they substantial?
How likely is this to happen?
As I see it...
First CRA has to uncover the error, then they would file a claim with the estate. Assuming the executor does not have, or did not get, a final tax clearance certificate from CRS, the executor would be liabable for the tax, up to the value of the estate that was distributed. 
If the estate had no value at time of death, then no liability to executor.
Then CRA would have to learn of the transfer of assets from father to son, then pursue the son. Whether this is discovered would likely depend on how long before he passed thst he transferred the assets and, likely more relevant, is the type of assets transferred and whether this affected the income or other reporting on the fathers and sons return.


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## carverman (Nov 8, 2010)

twa2w said:


> Yep, I agree that section 160 certainly applies in the OP 's case.
> Did your father know he was getting benefits he was not entitled to? Or did you learn of this when you reviewed his affairs or did his ginsl tax return.


If the father knew of some benefits he was not entitled to before his death, then his estate (assuming he had one) is liable for any benefits that should have been repaid, along with penalties and accrued interest for not repaying them in a timely fashion if and when the father's final return *OR* the estate return was (or should have been filed), CRA has rules on this, all you have to do is check their website.



> First CRA has to *uncover the error, then they would file a claim with the estate*. Assuming the executor does not have, or did not get, a final tax clearance certificate from CRS, the executor would be liabable for the tax, up to the value of the estate that was distributed.


Lots of points were not disclosed by the original poster, so it's diffiicult to tell by just guessing. If the OP is also the
executor/adminstrator of the father's estate (assuming there is or was a will) and it was not filed with Probate to get
clearance on the estate, then the executor could be in trouble with CRA, because when a person dies, the tax man
always come first to claim what taxes are due or unpaid. Once the tax situation is settled with CRA, then they will
issue a clearance certificate. 

As well, any retirement benefits, such as OAS/CPP and other benefits that were paid on behalf of the deceased AFTER
the month of death HAVE to be repaid in full. The executor , should have contacted CRA and sent in a copy of the
death certificate as soon as it was posssible to do so.
Ignoring that, can get the executor and the estate (if any) into serious trouble.
Going through probate and paying hefty estate taxes to Probate at least ensures some closure on some parts of
the estate, except for CRA. 
That is one of the risks one takes by avoiding probate and doing property and financial holdings transferring before death.



> If the estate had no value at time of death, then no liability to executor.


Maybe..hard to say. It all depends whether the executor/adminstrator did things properly or not. If the executor
filed papers with the knowledge available at the time as to benefits and estate, he may be ok...but it he ignored
the rules and even if there is $0 dollars in the estate now...CRA can launch an audit and go back as far as 6 years
of the father's tax returns (if he was filing returns), and find out what is possibly owing to them.

They could even take the executor to TAX COURT if they discover any impropriety in hiding or falsely declaring
income or property that should have been subject to taxes at the time of transfer..such as capital gains
payable by the son on acquired property..unless the property was held jointly at the time by the father and son
(right of survivorship).



> Then CRA would have to learn of the transfer of assets from father to son, then pursue the son. Whether this is discovered would likely depend on how long before he passed that he transferred the assets and, likely more relevant, is the type of assets transferred and whether this affected the income or other reporting on the fathers and sons return.


yes.


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## Numbersman61 (Jan 26, 2015)

This thread seems to have gone completely off base. Why all the discussion about executor's duties? The original poster indicated that ALL assets were distributed to him by his father prior to his father's death so there was nothing to probate. Consequently, no executor or administrator.

I have had relatives who died with no assets. There was no probate - just final tax return which I filed and notification to OAS and CPP. I paid funeral bill and that was it. No big deal.


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## carverman (Nov 8, 2010)

Numbersman61 said:


> This thread seems to have gone completely off base. Why all the discussion about executor's duties? The original poster indicated that ALL assets were distributed to him by his father prior to his father's death so there was nothing to probate. Consequently, no executor or administrator.


It depends on the assets and the province. Ontario has become very greedy since 1992 when the probate fees were changed to estate administration taxes ($flat fee of $250 for first $50K, and $15 per $1K on up from there depending on the value of the estate. 
Now, IF the father owned property, and the son was made the executor, it all depends on how the title transfer was handled.




> I have had relatives who died with no assets. There was no probate - just final tax return which I filed and notification to OAS and CPP. I paid funeral bill and that was it. No big deal.


No assets means that the relative disposed of their assets before their deaths OR they had no property assets where the province could consider that part of their estate.

Cash in the bank, OTOH, is easy to dispose of,. You just write out a bunch of checks to your relatives in small monetary amounts, (under $10K, where the gov't regulations could cause some investigation for possible laundering)..but small amounts of $5K or $9k over time, and the bank accts can be depleted easily leaving the person with no assets and basically no estate to worry about , where the gov't or CRA could come after the estate looking for "their share'. 

Just file their last return as you have done and that is it.

Now, in my case, my 92 yr old Mom has already signed over her house to my brother as half owner, since it is also HIS principle residence as well as hers, and when she passes, the house becomes his 100% due to "right of survivorship" with no capital gains taxes payable. 

She has already disposed of most of her life's savings to her family, so when she does pass, her estate will be next to nothing and the$250 min probate tax fee would apply, if even that. Her funeral was pre-arranged and
prepaid a long time ago.

My brother OTOH, may have a major issue with his estate when he passes (divorced with nobody of family) living there with him, except mother. I'm sure there may be a hurdle with Probate and his estate, because in Ontario, it's not easy to sell property without probate clearance once the solitary owner of the property passes.


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## AltaRed (Jun 8, 2009)

The OP needs to provide a few more details such as who was executor/administrator, who filed the final T1 and whether a CRA clearance certificate was applied for and obtained. The original post suggests there may have been an active attempt to defraud but that may be just the way the post was written.


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## sags (May 15, 2010)

I would add the duties of a POA are to administer the day to day financial transactions for someone.

The transfer of all the funds from the administered account to the POA's account could be questionable.

The POA is required by law to keep records of all transactions for the administered account.

It would be important to know which came first...........the POA appointment or the transfer of funds.

Also important to know if there were other heirs or beneficiaries and if they are aware of the money transfer.


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## sags (May 15, 2010)

Not directed at the OP............but a "beware" story for readers.

The population is aging and more people are going to be administering money as a POA for their parents.

They could be managing a lot of money, and they should be aware of the duties and responsibilities of a POA.

The POA operates as a lawyer.........a third party non involved party, and the POA must act accordingly.

Just as it would be unethical for a lawyer to "borrow" money from the parent's account........a POA doing so would be equally unethical.

Careful documentation of all transactions is extremely advisable, especially when other siblings are involved.

I worked with a guy who showed up one day wearing an electronic monitoring bracelet.

He was the POA for his mother. His truck needed repairs and his mother told him to take money from her account.

He did so, and a sister found out about it. She called the police and he was charged with theft.

The court ruled that as POA he was administering an account for someone incapable of "gifting" him the money.

He was convicted and sentenced to probation and house arrest.


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## carverman (Nov 8, 2010)

AltaRed said:


> The OP needs to provide a few more details such as who was executor/administrator, who filed the final T1 and whether a CRA clearance certificate was applied for and obtained. The *original post suggests there may have been an active attempt to defraud but that may be just the way the post was written*.


Here's my take on it, and I hope I'm wrong with the scanty information given by the OP, but..if either deceased father or the son defrauded the gov't in any way in an attempt to collect social benefits and not pay income taxes on income, the son may be in BIG trouble once CRA launch their investigation full force.
It may take a few months or even years, but there may be some surprises from CRA down the road to the son. 
Best to come clean while still able as the penalties are quite severe and at that point a lawyer may be
needed to defend from CRA. 

IF the father didn't file any tax returns, they can still find out who it was, unless the father didn't have a SIN , 
I believe to collect any kind of gov't benefits and pay income taxes, you have to have a SIN . 

They can also trace the father's information /bank transfers to the son, and find the son that way.
There is always a paper trail, especially when dealing with bank accounts.

*IF* CRA know the father's last name and last known address they can do a forensic investigation on any property or bank accounts or any investments that the father had before he disposed of them.
Then they could turn to the son, especially if they think any fraudulent purpose was done to collect those benefits. that the father was not entitled to and the son benefited from those benefits by having the father's assets turned over to him before the father's death. 

A possible scenario would be not repaying the gov't pensions or benefits when the deceased father was NOT
entitled to these benefits after the month of his death. 

CRA specifically mentions on their numerous website info; that once the person receiving those benefits is deceased, notification must be given to them along with a copy of the death certificate, so that future benefits are cancelled.

If the gov't/CRA don't receive this notification that is supposed to be done by the executor of the estate (or at least someone who is in the position) to submit the copy of the death certificate and a letter with the deceased relative's name, address and SIN, 
the payments would still be sent by EFT and deposited into the deceased relative's bank account 
because the banks also need to be notified that the person owning the bank accounts is deceased.

In this case, it is possible that someone who owns that bank acct with the deceased relative JOINTLY can still withdraw and money deposited in this bank account as the joint account would still be open even when the
deceased has passed. The banks would not close this account until they were notified also with a letter and a copy of the death certificate. 

More than likely the account(s) once closed would not be able to take deposits or withdrawals until clearance certificate from the Probate court and a letter of direction given by the executor/administrator of the deceased person's will, or a legal representative.

Then they could freeze the son's bank accounts until they were satisfied that fraud was not involved.
That could be viewed as "money laundering, " which is a lot different than just outright gifting from the parent to the child.


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## carverman (Nov 8, 2010)

sags said:


> The POA is required by law to keep records of all transactions for the administered account.


Absolutely. The law once applied does not take the POA appointment and misuse of the incapacitated person's funds lightly.

There are two kinds of POA, one for property (and money) and the other for personal care of the incapacitated person that cannot make proper decisions for themselves (Alzhemiers or dementia) and entrust their estate while living to someone they can trust.

Under the restrictions of what a POA can do, records have to be carefully kept and open to scrutiny so that the funds are used for the incapacitated person's well being, not to be used a bank account for personal use.

If the deceased father and son decided on a scheme to appoint the son as POA to allow movement of funds
from the father to son, and the father was NOT incapacitated, that is not what the POA is for.
The father could have just written checks to the son and moved the funds that way.


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## Market Lost (Jul 27, 2016)

ventingspleen said:


> Suppose my father got tax benfits for many years that he was not entitled to, but before he passed away in 2015, he made me power of attorney and transferred all his money to me, avoiding probate. So, say then after his death, the CRA discovers the he had received thousands of dollars that he clearly was not entitled to due to errors on his part, can the CRA come after me?


I take it you're asking this question because CRA has been making some inquiries, or you know about the problem, and you're worried? 

You're question is actually a complex one because there are a few things that would influence the answer

1) does CRA know?
2) did you know what your father was doing?
3) did you accept the assets in good faith, or did you know what he was doing before you accepted it?

From what you're describing, it's not just a matter for CRA, it could be a criminal matter, and I'm not joking about this. If you're father deliberately lied when he applied for benefits that he wasn't entitled to then this is fraud, and since he then gave you money that was ill-gotten then you could be in a bit of trouble. This isn't the forum for this issue, you need to seek legal advice, and I wouldn't wait. If, OTOH, you didn't know what was going on until after he passed away, then CRA can still come after you. Are they legally entitled? I'm not a solicitor, so I'm not about to venture a guess. However, I was an accountant, and if CRA comes after you then even if you aren't liable, it will still cost a lot of money, time, and headaches. Again, you should seek legal advice, and get ready to either settle or fight.


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## Numbersman61 (Jan 26, 2015)

Market Lost said:


> I take it you're asking this question because CRA has been making some inquiries, or you know about the problem, and you're worried?
> 
> You're question is actually a complex one because there are a few things that would influence the answer
> 
> ...


Good points. Since we have scant info from original poster, we can only guess as to the circumstances. My assumption is he did not know of the potential tax issues before his father died. Without more info from original poster, I can only say - be careful and truthful.


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