When Probating a Will in Ontario, one essential aspect of the process is obtaining a GST/HST clearance certificate from the Canada Revenue Agency (CRA). This certificate is a crucial step to ensure that the Estate is handled properly and that the executor can distribute the assets without personal liability.
What is a GST/HST Clearance Certificate?
A GST/HST clearance certificate is a document issued by the CRA that confirms that all GST/HST amounts, including any interest and penalties, have been paid. Or that the CRA has accepted security for the amounts owed. Essentially, it verifies that the deceased’s Estate does not have any outstanding GST/HST liabilities.
Why Do You Need a GST/HST Clearance Certificate?
Personal Liability Protection for Executors: Executors are responsible for managing and distributing the Estate according to the Will. If the Estate has any unpaid GST/HST obligations, the Executor can be held personally liable. Obtaining a clearance certificate protects the Executor from this liability by confirming that all necessary taxes have been settled.
Ensures Proper Distribution of the Estate: Without a clearance certificate, there is a risk that the Estate might be distributed with outstanding tax liabilities. This can lead to complications and disputes among Beneficiaries and potential claims against the Executor. The certificate ensures that the Estate is clear of GST/HST debts before distribution.
Compliance with Legal Requirements: Obtaining a clearance certificate is part of the legal process of winding up an Estate. It demonstrates that the Executor has fulfilled their fiduciary duty by ensuring all tax obligations have been met, thereby complying with the law.
Smooth Closure of the Estate: Having a clearance certificate facilitates the smooth closure of the Estate. It provides peace of mind to both the Executor and the Beneficiaries that all financial matters, including taxes, have been properly addressed.
How to Obtain a GST/HST Clearance Certificate
File All Required Tax Returns: Ensure that all GST/HST returns for the deceased, as well as the Estate, have been filed up to the date of death and for any subsequent periods.
Pay Outstanding Amounts: Make sure that any outstanding GST/HST amounts, including interest and penalties, are paid.
Complete Form RC159: Complete and submit Form RC159, “Request for a Clearance Certificate,” to the CRA. This form provides the necessary details about the Estate and the deceased.
Submit Supporting Documents: Along with Form RC159, you may need to submit supporting documents, such as the Will, the death certificate, and proof that all taxes have been paid.
Wait for Processing: The CRA will review the submitted documents and, if everything is in order, issue the clearance certificate. This process can take several months, so it’s important to apply as soon as possible.
Not to be overlooked: In addition to the HST/GST Clearance Certificate, an Executor should be aware that a similar Clearance Certificate should be obtained regarding the Deceased’s Income Taxes. Both should be obtained.
By obtaining GST/HST and Tax clearance certificates, Executors can ensure they are fulfilling their legal obligations and protecting themselves from personal liability while ensuring a smooth and proper distribution of the Estate. If you need any help or have questions reach out to Peter Peter@Smartwills.ca
Government of Canada Apply for a Clearance Certificate
Check out our blog post with resources on Children in Grief
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This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.
