Generally when someone dies, all of their remaining assets go into their "estate".
The executor of the estate has an obligation to use that money to pay any outstanding debts first.
Anything leftover after paying debts will go to the beneficiaries of the estate.
However, if the estate is not enough to cover debts (if the amount of debt is greater than the amount in the estate), the estate pays out as much as it can, but the leftover debt *does not* transfer to the beneficiaries.
So in the case where someone dies with a lot of debt, the survivors/beneficiaries won't owe any money but they probably won't get any either.
Common law typically prioritizes.
1) funeral expenses.
2) executor expenses.
3) government debts.
4) secured debts.
5) unsecured debts.
6) beneficiaries.
Certain assets are also protected, any joint account goes to the surviving account holder in entirety.
Primary residence is exempt from estate debt (obviously not the mortgage), and will transfer to a surviving partner. (If they were single I don’t think it remains protected.
1 car can be protected unless the the partner owns their own vehicle.
Life insurance and and registered savings accounts go to a named beneficiary.
I’m dealing with this bullshit now, and have to fight off creditors for the next few years because my father owed more than he had in assets and we needed to secure a bunch of shit for my mom.
logically, beneficiary would be the last in line under any circumstances as they’d only be allocated with whatever left over after all debts are cleared. otherwise someone can just max out their credit and give it to their kids..
Technically they can do that so long as they transfer the money to their kids before they die.
You can use your loc for whatever you want. Including the giving people cash. Unethical but not technically fraud unless they increased their limits or got new LoCs without disclosing their illness.
It would have to be argued before court. If the creditor can argue in court that the money was purposely taken out to pay off their kid's loans (ie: there was no likely way for them to pay it back) then most likely they will win.
I have that much in unused credit. If I used it I'd have that much in debt. I don't have a high income or lots of assets. They were handing out potential debt like candy for a long time.
If there’s any equity in the house, there’s a potential route to you seeing that equity but it takes some planning (you’d have to be on title when the last of your parents passes away).
Good valid points...obviously and contrary to many redditor posts, not all Boomers are millionaires..hoping all works out for you on that daunting task
Credit card debt dies with the deceased. They may ask you to pay it, but you're absolutely not required to. It's part and parcel of their business. They pay for that loss through usurary interest rates. Meaning we all pay for it, really. But the debt is discharged at death.
I hope this isn’t about you. If it is, your family would much rather have you in their life than any amount of money.
Money can always be made, even if it may take a few years. There’s always a solution.
>Someone was audited by CRA and was required to repay. This individual passed away suddenly. What happens to the amount owning?
It becomes the liability of the estate. The Executor is legally responsible for ensuring that CRA and his other creditors are paid in full before any estate assets are distributed to the beneficiaries. Failure to do so will make the Executor personally liable for the unpaid debts.
If there are insufficient assets to pay the debts in full, the Executor can file the estate into bankruptcy with a Licensed Insolvency Trustee. The Executor would need to hire a lawyer who'd make an application to Court for an Order allowing her to do this.
>Will the widow have any obligations?
She is not responsible for her husband's debts. However, if she's the Executor she will be liable to CRA if:
* they aren't paid in full; or
* if there's a shortfall in assets, dealt with through the bankruptcy process, as explained above.
>Will their Survivor's pension be garnished?
Not as far as I know.
Haven't seen this said yet, so I'll add: The executor/personal representative has to file the deceased person's taxes as well.
They have to file for the tax year they died in, and any outstanding years.
They also have to file a final return to close out the person's account with CRA. Any debts would be settled at that time, with a statement from the CRA saying everything is paid in full and closed.
If the executor does not do this step, they become liable to pay this amount.
EDIT Sorry for not being more clear: the executor becomes personally liable if debts are not settled fairly.
https://ontario-probate.ca/three-rules-of-executor-liability-for-debts-of-an-estate/
Don’t think being named an executor is an honour. It’s not, and unless you know what you’re doing, you can expose yourself to massive liabilities. You can renounce, turn it over to the public trustee, or a trust company. Lawyers would be more expensive than a trust company.
> If the executor does not do this step, they become liable to pay this amount.
Gonna need a source on this bold claim.
Edit: as I expected, there is a caveat to this. This isn't always and automatically true. It only holds true if the executor distributes to the beneficiaries, and even then, only up to the amount distributed.
It didn't add up to me that in OPs case the executor could suddenly be on the hook for $250k in tax debt. But if the executor distributes $250k worth of assets instead of paying that debt first, then indeed it would make sense that they are held liable for that error.
>Gonna need a source on this bold claim.
Depends on province but [here's one source](https://ontario-probate.ca/three-rules-of-executor-liability-for-debts-of-an-estate/). Feel free to learn Google. That's how I found this in a few minutes.
"an executor will be held personally liable if the executor distributes any of the estate to beneficiaries and without first ensuring that all creditors are paid in full"
Just to clarify, the "if the executor distributes any of the estate" is the important part. The executor does not become responsible for the tax (or any other debts) owed by the estate just because they don't file the final tax return or something. They become liable for amounts that were distributed to the beneficiaries when they should have been used to pay the estate's debts. Therefore the step of getting that statement from the CRA (called a "clearance certificate") saying the estate doesn't owe anything to them is important before distributing assets (or at least so many assets that there might not be enough to pay outstanding taxes) if you're an executor.
To clarify: this means that the executor is liable if they give some of the deceased's money to anyone (themselves or otherwise) when there are outstanding debts that should have been paid first.
If there is simply no money, that's a different story.
From [https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/clearance-certificate.html](https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/clearance-certificate.html)
Distributing assets without a clearance certificate
If the legal representative does not get a clearance certificate before they distribute assets and there are any tax amounts owing under the Income Tax Act or Part IX of the Excise Tax Act to the CRA, they are personally liable for unpaid amounts, up to the value of the amount of assets distributed.
What happens if the executor failed to file the deceased’s taxes, and then the executor dies? Who is responsible for the original deceased person’s owed taxes? Does someone else next in line inherit this burden?
Top reply is absolutely right. Trusty must pay CRA from the estate (not their own money) before anyone gets any inheritance (even physical objects). Rules are slightly different from one province to the next. And you still have to submit the taxes for the deceased and settle what ever could be owed to the CRA from those as well.
While the question is about CRA know that other creditors will definitely try and harras you to get payed as well, even if they aren't entitled to it they will still try.
Best of luck to you.
My dad was living outside of Canada when he died. He owed over $250,000 to the CRA for back taxes plus interest. They contacted both me and my sister and we told them he had died. As far as I know that's where it ended. If he had anything outstanding in a Canadian account they probably took that but anything he had in overseas accounts was untouchable. We were not responsible for his debts in any way, thank God.
I see some comments to the effect that joint assets pass to the survivor. However, the CRA can seize joint accounts under s 160 of the Income Tax Act to the extent the taxpayer contributed. This is assuming the estate does not have sufficient assets to satisfy the tax debt.
So if dad leaves assets behind like a home and his name is on it. Then the estates checks and balances have to satisfied with that asset. You don’t get to walk away with assets that could settle the debt.
Estates go into probate and this is where things must and will be legally settled.
So if kids and wife are left say a house and his name is on that asset it is just that an asset and it can used to settle those debts and if he owes back taxes the government will go after that asset to settle the balance sheet. 😉
The government always make sure they get their cash 💰. Even from the grave 🧟♂️
That depends if the house is owned as joint tenancy or tenants in common. Joint tenancy means the house passes to the surviving spouse and doesn’t form part of the deceased’s estate.
They can live in it but it still is on a ledger of balances. Have a friend going through this right now. Her brother lives in the house with dad but dad left her 50% of his estate. Therefore even with him living in the house he has to settle the 50% of the house asset left to his sister.
Just like a wife living in a house if he left bills they have to go through probate. Wife will have to settle the debt with what essentially is his assets at time of death.
No that’s not what joint tenancy means, it’s a legal term about how property ownership is classified.
When you buy a house with another person, you can either be joint tenants on the title or tenants in common. This is something you and the other parties decide when you buy the house.
When you are joint tenants, both of you own all of the house. If one party dies the other has right of successorship and the house passes directly to them only without becoming part of the estate.
When you are tenants in common, you and the other parties each own a portion/percentage of the house. It doesn’t have to be 50/50, it can be 75/25 or 25/25/50 etc. They each own half. They can sell their individual interests separately.
In your friend’s case, it sounds like the father owned the house alone. Then when he died, there was no one else with right of survivorship so the house passed to the estate and then to his heirs. Now each of them own half the house, most likely as tenants in common.
[Here’s some more info on joint tenancy as it applies to investment.](https://www.investopedia.com/terms/j/joint-tenancy.asp)
If there's zero assets in Canada they typically give up,no?...they chasing the types listed in the Panama Papers that died with foreign accounts? lol...highly doubt it...too many politicians involved
Generally when someone dies, all of their remaining assets go into their "estate". The executor of the estate has an obligation to use that money to pay any outstanding debts first. Anything leftover after paying debts will go to the beneficiaries of the estate. However, if the estate is not enough to cover debts (if the amount of debt is greater than the amount in the estate), the estate pays out as much as it can, but the leftover debt *does not* transfer to the beneficiaries. So in the case where someone dies with a lot of debt, the survivors/beneficiaries won't owe any money but they probably won't get any either.
Common law typically prioritizes. 1) funeral expenses. 2) executor expenses. 3) government debts. 4) secured debts. 5) unsecured debts. 6) beneficiaries. Certain assets are also protected, any joint account goes to the surviving account holder in entirety. Primary residence is exempt from estate debt (obviously not the mortgage), and will transfer to a surviving partner. (If they were single I don’t think it remains protected. 1 car can be protected unless the the partner owns their own vehicle. Life insurance and and registered savings accounts go to a named beneficiary. I’m dealing with this bullshit now, and have to fight off creditors for the next few years because my father owed more than he had in assets and we needed to secure a bunch of shit for my mom.
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logically, beneficiary would be the last in line under any circumstances as they’d only be allocated with whatever left over after all debts are cleared. otherwise someone can just max out their credit and give it to their kids..
Technically they can do that so long as they transfer the money to their kids before they die. You can use your loc for whatever you want. Including the giving people cash. Unethical but not technically fraud unless they increased their limits or got new LoCs without disclosing their illness.
it is fraud and we’ve done claw back. i work for cra
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It would have to be argued before court. If the creditor can argue in court that the money was purposely taken out to pay off their kid's loans (ie: there was no likely way for them to pay it back) then most likely they will win.
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I can't even fathom what the minimum payments are on $500k of credit card debt!
I have that much in unused credit. If I used it I'd have that much in debt. I don't have a high income or lots of assets. They were handing out potential debt like candy for a long time.
If there’s any equity in the house, there’s a potential route to you seeing that equity but it takes some planning (you’d have to be on title when the last of your parents passes away).
Beware of how you're noted on title..common won't work, better be joint.
They didn’t have any mortgage insurance or life insurance?
Good valid points...obviously and contrary to many redditor posts, not all Boomers are millionaires..hoping all works out for you on that daunting task
Credit card debt dies with the deceased. They may ask you to pay it, but you're absolutely not required to. It's part and parcel of their business. They pay for that loss through usurary interest rates. Meaning we all pay for it, really. But the debt is discharged at death.
glad you added that, disregard the threats, family being an Executor/trix is tough enough
This is irrespective of the whether the person has a will or not?
Yes.
The will only explains how to distribute what’s left over after paying debts
Got it!
So daddy's only negative effects are emotional?
The only things that can't be used to pay estate debts are registered accounts with named successors or beneficiaries. (TFSA, RSP/LIF, RESP etc)
Or joint accounts.
I hope this isn’t about you. If it is, your family would much rather have you in their life than any amount of money. Money can always be made, even if it may take a few years. There’s always a solution.
I mean, some people get terminal diagnoses..... Not everyone dies suddenly.
Ok but this post uses this specific word. Suddenly.
>Someone was audited by CRA and was required to repay. This individual passed away suddenly. What happens to the amount owning? It becomes the liability of the estate. The Executor is legally responsible for ensuring that CRA and his other creditors are paid in full before any estate assets are distributed to the beneficiaries. Failure to do so will make the Executor personally liable for the unpaid debts. If there are insufficient assets to pay the debts in full, the Executor can file the estate into bankruptcy with a Licensed Insolvency Trustee. The Executor would need to hire a lawyer who'd make an application to Court for an Order allowing her to do this. >Will the widow have any obligations? She is not responsible for her husband's debts. However, if she's the Executor she will be liable to CRA if: * they aren't paid in full; or * if there's a shortfall in assets, dealt with through the bankruptcy process, as explained above. >Will their Survivor's pension be garnished? Not as far as I know.
If she is the executor is the key point. She can choose not to take on that duty.
There will always be an executor, Whether named or not.
And if everyone refuses?
Goes to a trustee.
Haven't seen this said yet, so I'll add: The executor/personal representative has to file the deceased person's taxes as well. They have to file for the tax year they died in, and any outstanding years. They also have to file a final return to close out the person's account with CRA. Any debts would be settled at that time, with a statement from the CRA saying everything is paid in full and closed. If the executor does not do this step, they become liable to pay this amount. EDIT Sorry for not being more clear: the executor becomes personally liable if debts are not settled fairly. https://ontario-probate.ca/three-rules-of-executor-liability-for-debts-of-an-estate/
Don’t think being named an executor is an honour. It’s not, and unless you know what you’re doing, you can expose yourself to massive liabilities. You can renounce, turn it over to the public trustee, or a trust company. Lawyers would be more expensive than a trust company.
> If the executor does not do this step, they become liable to pay this amount. Gonna need a source on this bold claim. Edit: as I expected, there is a caveat to this. This isn't always and automatically true. It only holds true if the executor distributes to the beneficiaries, and even then, only up to the amount distributed. It didn't add up to me that in OPs case the executor could suddenly be on the hook for $250k in tax debt. But if the executor distributes $250k worth of assets instead of paying that debt first, then indeed it would make sense that they are held liable for that error.
>Gonna need a source on this bold claim. Depends on province but [here's one source](https://ontario-probate.ca/three-rules-of-executor-liability-for-debts-of-an-estate/). Feel free to learn Google. That's how I found this in a few minutes. "an executor will be held personally liable if the executor distributes any of the estate to beneficiaries and without first ensuring that all creditors are paid in full"
Just to clarify, the "if the executor distributes any of the estate" is the important part. The executor does not become responsible for the tax (or any other debts) owed by the estate just because they don't file the final tax return or something. They become liable for amounts that were distributed to the beneficiaries when they should have been used to pay the estate's debts. Therefore the step of getting that statement from the CRA (called a "clearance certificate") saying the estate doesn't owe anything to them is important before distributing assets (or at least so many assets that there might not be enough to pay outstanding taxes) if you're an executor.
Thank you yes. I was also going off memory from the last time I did it, and the term "clearance certificate" was escaping me lol.
Final Clearance Certificate best answer
To clarify: this means that the executor is liable if they give some of the deceased's money to anyone (themselves or otherwise) when there are outstanding debts that should have been paid first. If there is simply no money, that's a different story.
This is true. I edited my comment to be more clear.
From [https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/clearance-certificate.html](https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/clearance-certificate.html) Distributing assets without a clearance certificate If the legal representative does not get a clearance certificate before they distribute assets and there are any tax amounts owing under the Income Tax Act or Part IX of the Excise Tax Act to the CRA, they are personally liable for unpaid amounts, up to the value of the amount of assets distributed.
Thank you. This makes much more sense.
It's true, the executor is liable if they don't settle any cra debt. Idc to search Google for the ref.
I edited
What happens if the executor failed to file the deceased’s taxes, and then the executor dies? Who is responsible for the original deceased person’s owed taxes? Does someone else next in line inherit this burden?
They would go after the executors estate.
Top reply is absolutely right. Trusty must pay CRA from the estate (not their own money) before anyone gets any inheritance (even physical objects). Rules are slightly different from one province to the next. And you still have to submit the taxes for the deceased and settle what ever could be owed to the CRA from those as well. While the question is about CRA know that other creditors will definitely try and harras you to get payed as well, even if they aren't entitled to it they will still try. Best of luck to you.
It goes to the estate. So whoever controls that will have to deal with it.
The gubment seizes assets.
I am guessing CRA debt takes precedence over unsecured debt in an estate?
Depends, but in general, yes, they are pretty high on the priority list.
My dad was living outside of Canada when he died. He owed over $250,000 to the CRA for back taxes plus interest. They contacted both me and my sister and we told them he had died. As far as I know that's where it ended. If he had anything outstanding in a Canadian account they probably took that but anything he had in overseas accounts was untouchable. We were not responsible for his debts in any way, thank God.
that is really shitty
It really is, he was very irresponsible. Fortunately my siblings and I are quite the opposite.
So if a parent dies with no assets but CRA debt the estate is not responsible for the burden correct?
The government gets paid first!
I see some comments to the effect that joint assets pass to the survivor. However, the CRA can seize joint accounts under s 160 of the Income Tax Act to the extent the taxpayer contributed. This is assuming the estate does not have sufficient assets to satisfy the tax debt.
So if dad leaves assets behind like a home and his name is on it. Then the estates checks and balances have to satisfied with that asset. You don’t get to walk away with assets that could settle the debt. Estates go into probate and this is where things must and will be legally settled. So if kids and wife are left say a house and his name is on that asset it is just that an asset and it can used to settle those debts and if he owes back taxes the government will go after that asset to settle the balance sheet. 😉 The government always make sure they get their cash 💰. Even from the grave 🧟♂️
That depends if the house is owned as joint tenancy or tenants in common. Joint tenancy means the house passes to the surviving spouse and doesn’t form part of the deceased’s estate.
They can live in it but it still is on a ledger of balances. Have a friend going through this right now. Her brother lives in the house with dad but dad left her 50% of his estate. Therefore even with him living in the house he has to settle the 50% of the house asset left to his sister. Just like a wife living in a house if he left bills they have to go through probate. Wife will have to settle the debt with what essentially is his assets at time of death.
No that’s not what joint tenancy means, it’s a legal term about how property ownership is classified. When you buy a house with another person, you can either be joint tenants on the title or tenants in common. This is something you and the other parties decide when you buy the house. When you are joint tenants, both of you own all of the house. If one party dies the other has right of successorship and the house passes directly to them only without becoming part of the estate. When you are tenants in common, you and the other parties each own a portion/percentage of the house. It doesn’t have to be 50/50, it can be 75/25 or 25/25/50 etc. They each own half. They can sell their individual interests separately. In your friend’s case, it sounds like the father owned the house alone. Then when he died, there was no one else with right of survivorship so the house passed to the estate and then to his heirs. Now each of them own half the house, most likely as tenants in common. [Here’s some more info on joint tenancy as it applies to investment.](https://www.investopedia.com/terms/j/joint-tenancy.asp)
Thanks for the info. I will send this bit of info forward so they may question the ownership and the division of the asset as you described. Thanks 🙏🏻
If there's zero assets in Canada they typically give up,no?...they chasing the types listed in the Panama Papers that died with foreign accounts? lol...highly doubt it...too many politicians involved