Estate Trust Returns: Filing Requirements and Administration for Executors
When someone passes away, their estate may continue to earn income before assets are distributed. In these cases, the executor or legal representative may be required to file a T3 Trust Income Tax and Information Return. This return reports income earned by the estate after death and allocates it to beneficiaries where applicable.
When a T3 Estate Return Is Required
A T3 return must be filed if:
The estate earns income after death, such as interest, dividends, rental income, capital gains, or business income.
The estate distributes income to beneficiaries.
The estate claims deductions or allocates capital gains.
The estate elects Graduated Rate Estate (GRE) status and wishes to use graduated tax brackets and estate-specific deductions.
A T3 return is generally not required if:
The estate earns no income after death.
All assets are distributed immediately, and no income is generated during administration.
Common Income Inclusions
The T3 return captures income earned by the estate after the date of death, including:
Interest from bank accounts, GICs, or bonds
Dividends from shares held by the estate
Rental income from estate property
Capital gains from asset sales
Business income from sole proprietorships or partnerships
These amounts may be allocated to beneficiaries using T3 slips (Statement of Trust Income Allocations and Designations), which must be filed with CRA and issued to recipients by the return deadline.
Trust Administration: Setup and Filing Deadlines
Tax year-end: Estates typically use a calendar year-end (December 31) unless they qualify as a GRE.
Filing deadline: The T3 return and all related T3 slips must be filed within 90 days of the trust’s year-end (e.g., March 31 for calendar year estates).
Trust Account Number (TAN): Required before filing; apply through CRA’s Trust Account Registration process.
Schedule 15: Required for most estate trusts in 2025 unless exempt. This includes beneficial ownership disclosure for trustees, beneficiaries, and the settlor (the deceased).
Executors should maintain clear records of:
Income earned during administration
Distributions made to beneficiaries
Asset sales and capital transactions
Allocation details for T3 slips
Graduated Rate Estate (GRE): Benefits and Simplifications
An estate may elect GRE status in its first T3 return if:
It arises as a consequence of death
It is the only GRE for the deceased
It is designated as a GRE in the first return
It has not existed for more than 36 months after death
CRA confirms the following GRE simplifications as of 2025:
Non-calendar year-end: GREs may elect a fiscal year-end other than December 31.
Deemed year-end: A GRE’s final year-end occurs on the day it ceases to be a GRE (typically 36 months after death).
Reduced reporting: GREs may be exempt from certain enhanced trust reporting obligations if they meet simplified criteria (e.g., no complex structures, limited asset types).
GRE status also allows access to:
Graduated personal tax rates
Enhanced loss carryback options to the Terminal T1
Certain donation and capital gain deductions
Wrapping Up the Estate Trust
Once all assets are distributed and no further income is earned:
File a final T3 return, marking the trust as “closed.”
Ensure all T3 slips have been issued and reported.
Retain records for six years in case of CRA review.
Consider requesting a Clearance Certificate if the estate held taxable assets, especially before final distribution.
Key Takeaways for Executors
File a T3 if the estate earns income or distributes it to beneficiaries.
Use T3 slips to allocate income properly and meet CRA deadlines.
Include Schedule 15 for beneficial ownership disclosure unless exempt.
Apply for a Trust Account Number before filing.
Elect GRE status in the first return if eligible to access simplifications.
Wrap up the trust with a final return and retain records for audit readiness.
If you're administering an estate and unsure whether a T3 return is required, I can help you assess your filing obligations.