Executor Duties and Clearance Certificates

Introduction
Understanding executor duties and clearance certificates is essential for anyone responsible for administering an estate in Canada. When a person dies, their executor (called a “liquidator” in Québec) becomes legally responsible for managing the estate, filing the final tax returns, settling debts, distributing assets, and ensuring full compliance with CRA and Revenu Québec rules. Executors who distribute assets too early—before taxes are paid—can be held personally liable for unpaid tax. The Clearance Certificate is the final step that protects the executor from liability. Without it, the executor remains financially responsible even after the estate is distributed. This guide explains everything you need to know about executor duties and clearance certificates in Canada.

Legal and Regulatory Framework
Executor duties and clearance certificates are governed by the Income Tax Act, the Excise Tax Act, Québec’s Taxation Act, the Civil Code of Québec (succession law), the CRA Estate Guide, Form TX19 (Request for a Clearance Certificate), Form MR-14 (Québec equivalent), T1 Final Return rules, T3 Trust Returns for estates, TP-646 (Québec estate return), and federal and provincial probate requirements. Executors are legally obligated to file all required tax returns and settle all tax debts before distributing any estate property.

Executor or Liquidator Responsibilities
Executors must identify, safeguard, and manage all estate assets from the moment of death. Duties include obtaining the will, securing the residence, identifying bank accounts and investments, notifying institutions of the death, collecting life insurance or pension benefits, preparing an inventory of assets and liabilities, determining the fair market value of property, obtaining valuations for real estate and private company shares, paying estate debts, filing all tax returns, and communicating with beneficiaries. In Québec, liquidators must follow civil code rules, publish notices of liquidation, and prepare required succession documents.

Filing Tax Returns for the Deceased
Executors must file the T1 Final Return for the deceased, reporting all income from January 1 to the date of death. This includes employment income, pension income, RRSP/RRIF income, investment income, capital gains from deemed disposition, rental income, and business income. Optional returns such as Rights or Things Returns may be filed to reduce tax liabilities. Québec requires a TP-646 if the estate earns income after death. The executor must ensure full compliance to avoid reassessment.

Estate Income and the T3 Return
If the estate continues to earn income after the date of death—such as interest, dividends, investment returns, rental income, or business income—the executor must file a T3 Trust Return. The estate becomes a separate taxpayer. Beneficiaries may receive T3 slips for income allocated to them. Québec estates must file TP-646 Succession Returns in parallel. Executors must manage estate accounting until distribution is complete.

RRSP and RRIF Handling
RRSPs and RRIFs are fully taxable at death unless transferred to a qualifying beneficiary. Executors must verify beneficiary designations, ensure spousal or dependent rollovers are applied correctly, and avoid accidental taxation. If the estate is named as the beneficiary, special elections must be filed to apply spousal rollover rules. These are technical steps that, if mishandled, result in large tax burdens.

Real Estate and Capital Gains
Executors must handle deemed disposition of real estate, principal residence exemption classification, rental property capital gains, and any depreciation recapture. Accurate valuations are essential. Québec liquidators must also manage QST and transfer tax implications during estate property settlement. Executors may need professional appraisals to support capital gains calculations.

Paying Estate Debts and Taxes
Executors must pay funeral costs, legal fees, final utility bills, credit cards, personal loans, and all taxes owing. Taxes must be paid before distributing assets. CRA and Revenu Québec will not issue a Clearance Certificate until they are fully satisfied that all amounts have been remitted. Executors who distribute too early risk personal liability under the Income Tax Act and the Québec Taxation Act.

The Clearance Certificate (Critical Protection for Executors)
A Clearance Certificate confirms that all taxes owed by the deceased and the estate have been paid. It protects the executor from future CRA claims. Executors must apply using Form TX19 by sending the request with copies of the will, probate documents, inventory of assets, estate accounting, proof of tax filings, and proof of payment. Québec has a similar process for provincial liability discharge. Executors should never distribute estate assets before receiving both federal and provincial clearance.

When a Clearance Certificate Is Required
A Clearance Certificate is required when the estate distributes property to beneficiaries, transfers ownership of real estate, closes investment accounts, or dissolves the estate. Even small estates benefit from obtaining clearance. Without it, CRA or ARQ can assess the executor personally if tax was owed—even years later.

Common Executor Mistakes
Common errors include distributing assets before clearance is obtained, failing to file all required returns, misclassifying principal residence gains, missing RRSP/RRIF rollover elections, ignoring Québec TP-646 obligations, failing to include foreign assets, misunderstanding investment valuations, allowing beneficiaries to pressure for early distribution, and failing to maintain estate accounting.

Key Court Decisions
Courts consistently confirm executor liability for unpaid taxes when assets are distributed prematurely. Courts uphold CRA reassessments even when executors acted in good faith. Québec courts enforce strict civil law rules for liquidators, confirming that failure to follow succession procedures may invalidate estate actions. Courts also confirm that valuation errors, incomplete documentation, and improper tax filings justify reassessments.

Why CRA and Revenu Québec Audit Estates
CRA audits estates for missing final returns, unreported capital gains, improper RRSP/RRIF taxation, incorrect principal residence claims, real estate sales without deemed disposition reporting, unreported foreign assets, missing T3 or TP-646 filings, and early asset distributions. Revenu Québec audits estate valuation and succession accounting, particularly for estates involving real estate.

Mackisen Strategy
Mackisen CPA provides complete executor and estate support, including preparing T1 Final Returns, Rights or Things Returns, T3 Estate Returns, Québec TP-646 filings, capital gains calculations, principal residence exemption documentation, RRSP/RRIF rollover elections, business and real estate valuations, clearance certificate applications, estate accounting, and communication with CRA and ARQ. We protect executors from personal liability and ensure every tax obligation is satisfied before distribution.

Real Client Experience
A Montréal liquidator facing a complex estate with multiple properties sought Mackisen’s help. CRA questioned valuations; we provided full documentation and secured clearance. Another client distributed assets too early and received a CRA penalty notice. Mackisen negotiated relief and corrected filings. A Québec executor needed to manage RRIF rollovers, estate income, and foreign assets; we handled all compliance and obtained clearance certificates. Another family’s estate faced a multi-year CRA review; Mackisen resolved the case and prevented reassessment.

Common Questions
Do I really need a clearance certificate? Yes, if the estate distributes assets.
Can an executor be liable for unpaid tax? Yes—personally liable.
How long does clearance take? Often several months depending on CRA volume.
Does Québec require separate estate clearance? Yes, through Revenu Québec.
Do estates always require a T3 return? Only if income is earned after death.
Are RRSPs taxable at death? Yes unless transferred to a qualifying beneficiary.

Why Mackisen
With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps executors and liquidators complete their estate duties with complete accuracy and protection. Whether preparing final tax returns, securing clearance certificates, or defending against CRA or ARQ audits, our expert team ensures compliance, tax optimization, and peace of mind.

69. RRSPs, RRIFs, and TFSAs at Death

Introduction
Understanding RRSPs RRIFs and TFSAs at death is essential for families, executors, trustees, financial advisors, and estate planners. Registered accounts behave very differently when someone dies, and failing to apply the correct tax rules can cost families tens of thousands of dollars. RRSPs and RRIFs are generally fully taxable at death unless transferred to a qualifying beneficiary. TFSAs, on the other hand, are not taxable but still require proper beneficiary designations and post-death administration. Québec adds an additional layer of complexity because it does not recognize beneficiary designations on TFSAs and RRSPs unless held through insurance contracts. This guide explains everything you need to know about RRSPs RRIFs and TFSAs at death and how to manage them properly.

Legal and Regulatory Framework
RRSPs RRIFs and TFSAs at death are governed by the Income Tax Act, CRA policies on registered plan rollovers, Form T1090 for RRIF rollovers, T1 Final Return rules, estate tax rules, Québec’s Taxation Act, civil code inheritance laws, financial institution contract rules, and TFSA successor/beneficiary legislation. Executors must understand the interaction between federal tax rules and Québec succession law to ensure proper reporting and avoid unexpected tax liabilities.

RRSPs at Death
RRSPs are fully taxable on the deceased’s final return unless transferred to a qualifying beneficiary. The full fair market value of the RRSP as of the date of death is included in income. This can create a large tax bill if no rollover applies. However, tax can be deferred if the RRSP is transferred to a spouse, common-law partner, financially dependent child or grandchild, or a dependent child with a disability. When a spouse is named as beneficiary, the transfer is tax-deferred. If the estate is named instead, the rollover can still be completed using proper elections, but only if handled correctly by the executor.

RRIFs at Death
RRIFs operate similarly to RRSPs at death. The entire value is taxable unless rolled to a spouse or dependent. RRIFs typically have a minimum annual withdrawal, and any remaining balance at death is included in income unless transferred to a qualifying beneficiary. Proper designation ensures minimal tax impact. Executors must also account for the final year’s minimum payment, which may require separate reporting.

Spousal Rollovers for RRSPs and RRIFs
A spousal rollover allows the registered account to transfer tax-deferred to the surviving spouse. This requires proper beneficiary designation or correct tax elections through the final return. If the deceased named the estate instead of a spouse, the executor must file form T1090 or equivalent elections to apply the rollover. Many families lose the rollover because they do not file the required documents — resulting in full taxation of the RRSP or RRIF unnecessarily.

Québec-Specific Rules
Québec does not automatically recognize beneficiary designations for RRSPs and TFSAs unless the accounts are held as insurance contracts. This means many Québec residents unintentionally designate the estate as beneficiary, triggering full estate taxation. Executors must review account contracts carefully. Québec’s civil code succession rules may require estate administration even when other provinces allow beneficiary transfers. RRSP and RRIF rollover elections must still be filed to avoid tax.

TFSAs at Death
TFSAs are not taxed at death, but this only applies to amounts held up to the date of death. Growth after death is taxable to the estate unless a “successor holder” exists. In provinces outside Québec, a spouse may be named as a successor holder, allowing the TFSA to continue tax-free. In Québec, this is only allowed if the TFSA is insurance-based. Otherwise, the TFSA goes to the estate, and the post-death growth becomes taxable. Executors must handle TFSA transfers precisely to avoid losing tax-free status.

Successor Holder vs Beneficiary
A successor holder completely takes over the TFSA — tax-free and intact. A beneficiary receives the TFSA value, but the account stops being a TFSA. Only spouses can be successor holders, and only if legally recognized under provincial law. Beneficiary designations in Québec often revert to the estate unless structured through insurance.

Treatment of Post-Death Growth
RRSPs and RRIFs do not generate taxable post-death growth — the fair market value on the date of death is what matters. TFSAs do generate taxable post-death income unless a successor holder is named. Executors must separate pre-death and post-death values properly.

Filing Requirements for RRSPs, RRIFs, and TFSAs
RRSP and RRIF income must be reported on the T1 Final Return unless a rollover applies. Executors must provide the CRA with:

RRSP FMV at death
RRIF FMV at death
withdrawals at death
minimum RRIF payments
rollover elections
spousal or dependent beneficiary documents
estate receipts

TFSAs require different reporting. Financial institutions issue a TFSA Fair Market Value at death report. Executors may need to report taxable income earned inside the TFSA after death on the T3 Estate Return.

Common Executor Errors
Common mistakes include failing to review beneficiary designations, assuming Québec rules match federal rules, forgetting to file spousal rollover elections, distributing RRSP proceeds before planning taxes, misreporting RRIF minimum payments, and failing to file a T3 for TFSA post-death income. These errors lead to reassessments, penalties, and unexpected taxes.

Key Court Decisions
Courts confirm that RRSP and RRIF rollovers fail if trust conditions are not met or if documentation is missing. Québec courts reinforce that civil law succession rules override beneficiary expectations. Courts also confirm that successor holder designations must be properly executed, or the TFSA loses tax-free status at death.

Why CRA and Revenu Québec Audit Registered Accounts
RRSP and RRIF values are large contributors to final tax bills. CRA and ARQ audit these accounts for missing rollovers, incorrect beneficiary applications, failure to report taxable balances, misclassified TFSA income, and estate reporting gaps. Québec audits TFSA transfers aggressively due to differences in provincial law.

Mackisen Strategy
Mackisen CPA provides full support for RRSPs RRIFs and TFSAs at death. We prepare final tax returns, RRSP and RRIF rollover elections, evaluate dependent beneficiary eligibility, manage Québec TFSA and RRSP succession issues, calculate taxable amounts, prepare T3 estate returns for post-death TFSA growth, coordinate with financial institutions, and secure compliance with CRA and ARQ. We also protect executors from errors that could cause unnecessary taxation.

Real Client Experience
A Québec client had an RRSP taxed fully because the beneficiary designation was invalid under provincial law. Mackisen intervened, filed corrective elections, and recovered most taxes. Another estate involved TFSA post-death income that CRA tried to tax incorrectly; we filed a T3 Estate Return and corrected the assessment. A couple’s RRIF rollover required complex elections, which we handled to ensure complete tax deferral. A family with multiple registered accounts across provinces needed cross-border succession planning; we coordinated with the notary and obtained accurate results.

Common Questions
Are RRSPs taxable at death? Yes unless transferred to a qualifying beneficiary.
Can RRIFs transfer to a spouse tax-free? Yes with proper elections.
Is a TFSA taxed at death? No, but post-death growth may be taxable.
Does Québec recognize TFSA successor holders? Only for insurance-based plans.
Do RRSPs require a T3 return? Only if income continues after death.
Can executors fix incorrect beneficiary designations? Sometimes, but with strict rules.

Why Mackisen
With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps families navigate RRSPs RRIFs and TFSAs at death with precision and full compliance. Whether you are filing rollover elections, preparing final tax returns, handling Québec-specific registered plan rules, or defending an estate in a CRA or ARQ review, our expert team ensures accurate reporting, tax optimization, and complete protection for executors and beneficiaries.