I filed a Final return in 2021. Client died Nov. 3/2020 and Credit Union was advised. They have now issued a T5 for $120 +/- To the Estate of … for interest earned on the account during 2021. What would be the proper way of dealing with this small amount of money. Would I need to file an Optional - Rights or Things for the estate for 2021?
The client is also waiting for CRA to finish a review of a pension adjustment from Service Canada.
Thank you for your help…
Normally would file T3 return, also usually put CPP death benefit there as well.
Thanks for the feedback @jimt Client had not worked since 1961, stay at home Mom, and no CPP death benefit.
My understanding is that all the optional returns are for income earned up to the date of death. Any income earned after the date of death has to be filed using a T3 Trust Return.
Correct, income earned after the date of death is reported on a T3 Trust Return. The Rights and Things T1 Return is used when income was earned and owing to the deceased but not paid to them until after their death. Interest income can’t be reported on a T3 Trust Return.
@tsolowczuk … did I read that correctly, “Interest income can’t be reported on a T3 Trust Return.”
If it is earned AFTER the date of death, how else would you report it? I’ve reported it on the T3 Trust several times with no issues from CRA.
Thank you for catching that! I should have waited till the morning to respond. Interest earned up until the date of death is reported on the Final T1 Return, none of it can be reported on a Rights and Things T1 return, and the interest earned after the date of death is reported on the T3 Trust and Estate Return. The Trust and Estate Return can have a non-calendar year initially. Good night everyone.
| kozakworld
February 24 |
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@tsolowczuk … did I read that correctly, “Interest income can’t be reported on a T3 Trust Return.”
If it is earned AFTER the date of death, how else would you report it? I’ve reported it on the T3 Trust several times with no issues from CRA.
Thank you everyone for the input and clarifying a few things. I only have the T1 subscription for TaxCycle and now for a $125+/- interest to the estate I will have to file a T3 which will cost me and the client more than the interest. Oh well, Death & Taxes.
Have a great day 
I only file a handful of Graduated Rate Estate (Type 903) T3 Trust Returns each year (perhaps between 3 to 5 only), to claim the CPP Death Benefit and perhaps some T5 interest earned after the date of death. When there is an amount owing to CRA on the Trust, these returns have to be paper filed (they can only be e-filed when there is a Zero balance). So for the small number I file yearly, there is little value in purchasing the TaxCycle T3 module (since they can’t be e-filed) and would mean I would have to charge my clients slightly more to offset the cost of the software. The one I filed this year already was for a client who is insolvent so the family is paying me out of pocket to file it.
I use the fillable PDF’s downloaded from CRA’s website
I prepared a very simple excel spreadsheet which I use as a template to make sure I do the math correctly. In Manitoba, we claim the Family Tax Benefit.
At the point where clients start coming to me with more complex T3 Trusts involving more schedules, then I would definitely purchase the T3 module, but at this point it is manageable using the fillable PDF’s.
starting in the next couple of weeks they will be able to efile
Thanks Gerry. This client was a widow in mid 90’s and not eligible for CPP death benefit. The only income to the estate will be under $150. I haven’t done a T3 before, but will stumble my way through and may reach out to you and the community.
Thanks again for your help and responses.
Tom
You can report the small amounts of interest like this on the beneficiaries personal taxes rather than filing a full T3 for this. FYI, you can also do this for the CPP death benefit if it’s the only other income earned after the date of death.
Good point @Laura. Although this is only beneficial if the executor or beneficiary have low income and are taxed at the lowest tax bracket after this new income is added to their tax return. For example, with my last T3 Return that I filed last month to claim the CPP Death Benefit, the estate would owe $446 (filed from Manitoba and claiming the Family Tax Benefit), whereas filing it on the executor’s tax return would have amounted to an amount owing of almost $700 due to this person’s higher tax rate.
Yes you’d have to weigh any potential increase in tax against the additional cost of compliance. I’d charge more than $250 to file the T3, so if that were the only income, assuming one beneficiary, they would still be better off to pay the tax personally than pay me to file a T3.
Hi Laura, sorry to bother you., please. help me. My husband passed away in 2023. In 2024 I got T5,
issued to my deceased husband’s Estate, and amount is $175.98, this money came from TFSA funds which are already transferred to me.
I don’t know what to treat this T5 slip. Should i fill T3 return?
Thank you very much in advance for your answer.
Even if you filed a T3, you would issue a T3 slip to yourself to report the income. Since you received the TFSA, the income since the date of death is your income. Also, I’d charge a lot more than $250 to do a T3 return for one income slip and one slip issued to the beneficiary. Add the T3 slip to your 2024 return.
The quick and easiest answer is that you can just include that T5 on your personal tax return.
However, if it’s from his TFSA I would wonder if you were not set up correctly as a succession holder (vs. a beneficiary). If you were the spouse and succession holder, the post death gain should have also rolled over to you tax free so the bank may have issued the slip in error. If you know you were the succession holder and the TFSA rolled over to you (as opposed to being cashed out and you were given the cash), then you may want to contact the bank and ask them why they issued that slip.
Hi guys, thank you infinitely for your answer. I can explain what happened - you understand the reason, because I don’t understand this slip. My husband passed away in 2023. I unformed the bank couple of months after his death (he passed accidently, some period of time I was not able to think about anything). Bank probably made a mistake and dumped his TFSA and RRIF as cash. In tax return for 2023 (which I did in 2024) I found out that I have a problem. For RRIF I filled T1090, but nothing TFSA. I asked bank to roll out these funds to me as RRIF and TFSA. What bank did in Oct. 2024. For RRIF I got T4RIF on my name and bank issued Retirement Saving Plan Contribution Receipt. And T5 ($175.98) which I interpreted as TFSA interest for the time when TFSA was as the cash.
Yesterday I called to the bank, and they say they are not tax organization.
Please, guys, help me, give me the advice what to do with this situation.
Thank you infinitely in advance for your suggestion, I appreciate your time, attention and willing to help.