The Money Mustache Community
Around the World => Canada Discussion => Topic started by: Jtaxes on March 09, 2021, 12:36:58 PM
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I have a question regarding the CRA Death Benefit. I applied and received the death benefit for my mother this year. I later received a T4a tax document for this benefit named to the estate. The estate was renounced and the Government of Quebec became the new liquidator of the estate.
I have found some information regarding this on the CRA website but I am still uncertain if I need to claim this on my personal taxes or if this is for the estate.
This T4a is not linked to my CRA account.
Here is the information I found on the CRA website:
Reporting a CPP/QPP death benefit amount
The Canada Pension Plan / Québec Pension Plan (CPP/QPP) death benefit is a one-time lump-sum payments to the estate of a deceased CPP/QPP contributor. For more information on applying for the CPP or QPP death benefit, go to Death Benefit or Survivors' Benefits (Retraite Québec).
The amount of the death benefit is shown in box 18 of Form T4A(P), Statement of Canada Pension Plan Benefits. Do not report this amount on the final income tax and benefit return for the deceased person. Instead, include this amount in the estate’s taxable income on line 19 of the trust’s T3 trust income tax and information return in the year the payment is received.
If the death benefit is payable to a beneficiary in the year, report the amount on line 47 of the T3 return and on line 926 of Schedule 9. Prepare a T3 Summary and slip in the beneficiary’s name. The beneficiary will have to include the amount on their income tax and benefit return on line 130.
Note
If the death benefit is the only income of the estate, and a T3 return does not otherwise have to be filed, the benefit can simply be reported on line 130 of the beneficiary’s income tax and benefit return.
A death benefit will generally not be taxable if the recipient is not a beneficiary of the estate, and all of the following circumstances apply:
the taxpayer who received the death benefit paid the deceased's funeral expenses
the amount of the death benefit is not more than the funeral expenses
the deceased has no heirs, and there is no other property in the estate
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I hope you got your answer, but no, you do not claim it.
The estate pays taxes on it, if required.
The only way you would have used the money would have been as executor before renouncing the estate, or if you used it for funeral expenses and sent the bill to the estate. Sometimes a funeral home will bill the estate directly for funeral costs, sometimes they send the bill to the relative placing the order, who then effectively "bills" the estate after.
Funeral expenses are often paid / released from the estate before the entire accounting is finished.
Between the death (and final tax return) and disbursement to heirs, the estate is essentially considered a "trust", and results in the T3 forms / filing that is mentioned on the CRA site. This is because many estates take more than a year to wind up and close (hand over all assets to beneficiaries).
Generally, money from the estate disbursed to beneficiaries (especially non-spouses) has been fully taxed before you receive it.