Clearance certificates are written notices issued by the Canada Revenue Agency to confirm that an estate has no outstanding tax liabilities to Canada.
If an executor distributes the assets of an estate before getting a clearance certificate confirming that all taxes and any interest penalties have been paid, the executor can be personally liable for payment of the taxes and penalties out of their own pocket!
The purpose of the clearance certificate is to relieve the executor from any future tax liability which may arise from the Estate prior to making any final distributions to the beneficiaries.
Applying for a Clearance Certificate
• Clearance Certificates are not automatically issued, you have to apply for it
• The Clearance certificate application is sent in once the final tax return notice of assessment has been received
• You can’t assume that your accountant will do this, you must specifically request that this be done
• Do not expect that the lawyer assisting with the estate will apply for the Clearance Certificate as this is and accounting function
The Long Wait
It can take up to six months, after application, to receive the Clearance Certificate.
Understandably beneficiaries can become quite frustrated or impatient with the delay in settling the estate and receiving their inheritances. Understanding the potential liability for the executor often isn’t enough to mitigate the frustration of the long delay.
However, there are ways to distribute major portions of the estate while waiting for the final Clearance Certificate. It is recommended that you do not proceed with an “interim distribution” without working with a tax accountant to determine how much of the estate should be withheld to cover what taxes might be owing by the estate.
AG Tax LLP Can Help
If you have any tax-related queries or need assistance with tax planning or filing please contact AG Tax. Our tax professionals are highly-experienced with US and Canadian tax laws and can provide you the right guidance to handle your tax situation.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to US, Canadian, and other international tax laws. We can assist with:
- Canadian Personal and Corporate tax returns
- Cross Border Taxation and Business Planning
- US Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.