If you are an executor who recently settled (or are in the process of settling) an estate for a friend or loved one, you may be wondering “What is a clearance certificate, and do I need to apply for one?”
What is it? In short, a Clearance Certificate is written confirmation from the Canada Revenue Agency (CRA) that the deceased (and their estate) has paid all taxes, interest, and penalties owed, up to the date the certificate is issued.
Is it required? The Clearance Certificate is not a legal requirement, but it can provide comfort and peace of mind to the executor, before they distribute the estate in its entirety. If, for example, an executor distributes all of the estate assets to beneficiaries, and then receives notice of a re-assessment tax liability from CRA, they would be personally liable to ensure this is paid. Receiving a clearance certificate before distributing estate assets is not mandatory, but it is a good idea.
How can I get a Clearance Certificate? To apply for a Clearance Certificate the executor needs to first ensure all tax returns have been filed and any outstanding taxes have been paid up. Then they can fill out form TX19 and file it, along with supporting documents such as a copy of the Will and statement of estate assets.
For more details about the Clearance Certificate please visit the CRA website.