Tax Question:
What is a Clearance Certificate and why is it important?
Facts:
A clearance certificate is a document that you apply for with Canada Revenue Agency (CRA) that certifies all amounts for which the deceased is liable to CRA have been paid, or that they have accepted security for the payment. If you as the executor do not get a clearance certificate, you can be liable for any amount the deceased owes.
Discussion:
As the legal representative, you may want to apply for a clearance certificate before you distribute any property under your control. In practice, the legal representative will normally make an interim distribution of assets to the beneficiaries. Sufficient property to cover the estimated final income tax payable is held back until the clearance certificate is received.
To request a certificate, complete Form TX19, Asking for a Clearance Certificate, and send it to CRA. Do not include Form TX19 with a tax return. Send it only after you have received the notices of assessment for all the returns required to be filed and paid or secured all amounts owing. A clearance certificate covers all tax years to the date of death. If there is a testamentary trust return filed then a separate clearance certificate is needed for the testamentary trust.
You will need to send the following with the application for a clearance certificate:
• a copy of the will or letter appointing an administrator
• all probate documents,
• a list of assets and liabilities which includes the names, addresses, and social insurance numbers or account numbers of the recipients and his or her relationship to the deceased
• a letter of authorization that you have signed or a completed Form T1013 (Authorizing or Cancelling a Representative). This is required if you want CRA to communicate with any other person or you want the clearance certificate sent to any address other than your own.
Recommendation:
If you would like to discuss or need help in preparing a clearance certificate, please contact Gilmour Knotts Chartered Accountants.