# taxes after death



## redlight (Apr 3, 2015)

My mother passed away last year and left no executor or administrator. Me and my older brother inherited some rrsps she had, no taxes were taken off. I paid for her funeral expenses and received the death benefit $2500 for it. For some reason i am receiving her t4s from various pensions. I believe she will owe several thousand dollars in taxes. Is this in anyway my responsibility to pay....thanks


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## carverman (Nov 8, 2010)

redlight said:


> My mother passed away last year and left no executor or administrator. Me and my older brother inherited some rrsps she had, no taxes were taken off. I paid for her funeral expenses and received the death benefit $2500 for it. For some reason i am receiving her t4s from various pensions. I believe she will owe several thousand dollars in taxes. Is this in anyway my responsibility to pay....thanks


Did she leave a will? You are her son and even if there is no executor or administrator mentioned in her will, 
the probate court and the pension institutions will be sending those T4Ps to you because
either you ( or someone else), HAS to file her last income tax RETURN, and pay any taxes owing to CRA from her estate.


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## redlight (Apr 3, 2015)

carverman said:


> Did she leave a will? You are her son and even if there is no executor or administrator mentioned in her will,
> the probate court and the pension institutions will be sending those T4Ps to you because
> either you ( or someone else), HAS to file her last income tax RETURN, and pay any taxes owing to CRA from her estate.


no will . Are you saying that the next of kin inherits any debt owed?


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## redlight (Apr 3, 2015)

redlight said:


> no will . Are you saying that the next of kin inherits any debt owed?


there really wasnt much of an estate other than the rrsps, she didnt have much.


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## stardancer (Apr 26, 2009)

redlight said:


> no will . Are you saying that the next of kin inherits any debt owed?


You don't inherit debts like credit cards etc. However, someone must pay the taxes owing on the RRSP, and that means you and your brother will be in CRA's sights for them. See a lawyer asap. There may also be some probate taxes owing (provincial).


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## OhGreatGuru (May 24, 2009)

An accountant might be more help than a lawyer if the mother died only last year. 

If OP and brother inherited the RRSP's, I would assume they were named beneficiaries, so they passed outside the estate. Unfortunately the estate is responsible for the tax bill on collapse of the RRSP's on date-of death. And CRA will go after the beneficiaries if the taxes aren't paid.

It doesn't sound like there was sufficient estate to require probate (or probate fees). But the OP and brother may need to file some legal paperwork to establish their authority to settle the estate, particularly with respect to taxes.


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## OptsyEagle (Nov 29, 2009)

Tax law does not allow your mother to avoid taxes at death, simply by naming a beneficiary on the RRSPs. So with that in mind your and your brother's obligations will be limited to the amount of the taxes or the entire value of RRSPs, whichever is less.


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## carverman (Nov 8, 2010)

OptsyEagle said:


> Tax law does not allow your mother to avoid taxes at death, simply by naming a beneficiary on the RRSPs. So with that in mind your and your brother's obligations will be limited to the amount of the taxes or the entire value of RRSPs, whichever is less.


Yes, someone has to file the late mother's tax return in the year of her death...that can be an "adminstrator" such a son (benefiiciary) or somebody appointed, like a lawyer.
They will not get out of paying taxes based on her income in the year of her death. CRA has a paper trail with the T4P/T4RRSP.

CRA gets a copy of those as well from the financial institutions, as well as the representative/beneficiaries of the estate of the person who had the RRSPs. The longer you leave it to file her last return, THE MORE the INTEREST penalty WILL BE by CRA no doubt. 

read..



> Should you die while you still own your RRSP,* its entire value must be included in your income in the year of your death *unless your spouse or common-law partner or your financially dependent child or grandchild is entitled to the funds. If you designate your spouse or common-law partner or* financially dependent child or grandchild as beneficiary of your RRSP, the proceeds from the plan will be taxable in your beneficiary’s hands in the year they’re received, unless they are transferred into his or her own tax-deferred plan.
> *
> *If none of the above is designated as the beneficiary of your RRSP, its value may still be taxable in his or her hands on your death, provided he or she is a beneficiary of your estate. This approach may provide more flexibility, but more paperwork will be involved.*


http://www.taxplanningguide.ca/tax-planning-guide/section-2-individuals/death-rrsp/

So if the OP and his brother are both beneficiaries of the mothers RRSp, they can probably transfer the funds to their own RRSPs if they have one...or open up individual RRSPs for each to them to avoid paying significant income tax on the mother's rrsp.

This really needs to be done before the recipient receives the money though. If they have already settled the mother's RRSP, then it is probably too late to
avoid paying taxes on the mothers RRSP accounts.


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## redlight (Apr 3, 2015)

for the most part my brother took his money and ran leaving me on the hook for my moms taxes. is there anyway to pay just my share of the taxes? She probably would not have had any taxes owing if not for the rrsp's.


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## AltaRed (Jun 8, 2009)

carverman said:


> So if the OP and his brother are both beneficiaries of the mothers RRSp, they can probably transfer the funds to their own RRSPs if they have one...or open up individual RRSPs for each to them to avoid paying significant income tax on the mother's rrsp.
> 
> This really needs to be done before the recipient receives the money though. If they have already settled the mother's RRSP, then it is probably too late to
> avoid paying taxes on the mothers RRSP accounts.


Unless the brothers were financially dependent on the mother, the RRSPs cannot be transferred to the sons' RRSPs. The RRSPs were crystallized on the date of death. Taxes are due.

If the estate is broke, then I believe each son should only be responsible for his share of taxes up to but not exceeding the value of his share of the RRSP. CRA may try, but to my knowledge cannot make one beneficiary responsible for total taxes. A tax accountant should be queried about this potential exposure.


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## carverman (Nov 8, 2010)

AltaRed said:


> Unless the brothers were financially dependent on the mother, the RRSPs cannot be transferred to the sons' RRSPs. The RRSPs were crystallized on the date of death. Taxes are due.


Thanks for the correction. Interesting topic.

found some more info online on this..



> for any other beneficiary
> the RRSP is included in the income of the deceased, taxed in the terminal return and then the proceeds are paid to the beneficiary


http://theexcellentadvisor.com/trs_RRIFrrsp_faq.pdf



> If the estate is broke, then I believe each son should only be responsible for his share of taxes up to but not exceeding the value of his share of the RRSP. CRA may try, but to my knowledge cannot make one beneficiary responsible for total taxes. *A tax accountant should be queried about this potential exposure*.


Definitely in this case, since there are two beneficiaries.


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## victorcor2015 (Mar 30, 2021)

I've been following this discussion.

I have another situation.

Person A received the Death Benefit of 2,500, and distributed it amongst three people (Person A and two siblings).
The slip has the name of Person A on it.
Does Person A report the whole amount, or does each of them report their own share received by Person A) (2,500 / 3 ).

Thank you


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## Yasehtor (Oct 12, 2018)

Person A should report the death benefit on their T1. They can calculate any increase in taxes they have to pay and have the other two siblings repay them 1/3 of the additional tax. Easiest way to handle IMHO.


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## AltaRed (Jun 8, 2009)

Why would the death benefit have the name of Person A on it? It is normally issued to the "Estate of......." and be deposited to the Estate account and included in Estate taxes?


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## Tostig (Nov 18, 2020)

Having the Death Benefit paid to the estate of the deceased doesn't make any sense to me. How can the surviving spouse or children benefit from it if they can't get access to it? It'll end up in one of those dead-money accounts the CRA has.

Since the CPP of the surviving spouse increases, CRA knows who really should be getting this death benefit.


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## Numbersman61 (Jan 26, 2015)

Tostig said:


> Having the Death Benefit paid to the estate of the deceased doesn't make any sense to me. How can the surviving spouse or children benefit from it if they can't get access to it? It'll end up in one of those dead-money accounts the CRA has.
> 
> Since the CPP of the surviving spouse increases, CRA knows who really should be getting this death benefit.


This Is completely incorrect. First, the CPP does not automatically increase for the surviving spouse. How does CRA know who is to receive the Death Benefit? You apply using this form https://catalogue.servicecanada.gc.ca/apps/EForms/pdf/en/ISP-1200.pdf


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## Yasehtor (Oct 12, 2018)

AltaRed said:


> Why would the death benefit have the name of Person A on it? It is normally issued to the "Estate of......." and be deposited to the Estate account and included in Estate taxes?


CRA's process is in the link below. It indicates that:
*If no estate exists*_ or if the executor has not applied for the death benefit, payment may be made to other persons who apply for the benefit in the following order of priority:_

_the person or institution that has paid for or that is responsible for paying for the funeral expenses of the deceased;_
_the surviving spouse or common-law partner of the deceased; or_
_the next-of-kin of the deceased._
Death Benefit


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## AltaRed (Jun 8, 2009)

I made an assumption from post #12 there was a proper Will and estate probation/distribution process, but post #12 actually had no detail on how the estate was processed. I should not have made the assumption I did without having asked for more details first. Based on the little we know, the best assumption is your response in post #13.


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## Retiredguy (Jul 24, 2013)

Yasehtor said:


> Person A should report the death benefit on their T1. They can calculate any increase in taxes they have to pay and have the other two siblings repay them 1/3 of the additional tax. Easiest way to handle IMHO.


I agree.


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## digitalatlas (Jun 6, 2015)

I think Yasehtor and Retiredguy have the best way of going about it. When I was in that situation, even though I technically paid the last expenses, I put my mom's name down on the application and CRA sent the check to my mom.

The trouble with getting the other siblings to repay 1/3 of the additional taxes, is this requires the other siblings to be kind of reasonable (which is not always the case). In an ideal situation (which probably no one is thinking about at the time) is that you keep all of the death benefit, wait until after you've filed/calculated your taxes for the year, then whatever net amount remains after taxes, then split that among the siblings.


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