Tax Tip:  Distributing Estate Property

In an August 8, 2014 Technical Interpretation, CRA reminded taxpayers that an Executor should obtain a Clearance Certificate before distributing property under their control.

The Certificate attests that all amounts payable by the Estate have either been paid or the Minister has accepted security for such amounts. If the Executor distributes the Estate’s property without first obtaining a Clearance Certificate, the Executor may be personally liable for amounts that are outstanding to the Government.

The Clearance Certificate protects the Executor only in the above-noted capacity. CRA can still pursue the beneficiaries of the Estate for any unpaid taxes even where a Clearance Certificate is issued.

Action Item: Executors should consider obtaining a Clearance Certificate to avoid personal liability.