When does an estate have to file a T3 return, and when can the executor skip it?
An estate files a T3 for any year it realizes a gain or receives payments after death, due 90 days after its year end (March 31, 2027 for a December 31, 2026 year end). A graduated rate estate can pick a year end up to a year after death. Estates distributed right after death with no income generally skip it.
When does the CRA require an estate to file a T3?
The CRA's general rule: a T3 is filed if there is any gain realized or payments received by the estate after the death canada.ca. Behind that sits the CRA's list of tests for every trust, and an estate is a testamentary trust that arose on and as a consequence of the death
canada.ca. Run each year of the estate through this table.
| Situation in the estate's tax year | T3 required? | Why |
|---|---|---|
| Estate distributed right after death, no income earned before the distribution | Generally no | Give each beneficiary a statement of their share instead |
| Only income after death is a CPP or QPP death benefit | Generally no | A beneficiary can report it on their own return |
| Estate sold capital property, or has a taxable capital gain | Yes | Disposition of capital property |
| Estate kept any taxable income, such as $400 of interest | Yes | Tax payable ($56 federal at 14%) |
| Income allocated to beneficiaries and total income over $500 | Yes | $500 total income test |
| Income allocated and more than $100 to any one beneficiary | Yes | $100 single beneficiary test |
| Income allocated and a capital distribution made | Yes, even with total income of $500 or less | Capital distribution test |
| Any income allocated to a nonresident beneficiary | Yes | Nonresident beneficiary test |
| The CRA asks for a return | Yes | Requested to file |
Every row comes from the CRA's who should file page canada.ca, and the T3 guide repeats that a capital distribution forces a return even when total income from all sources is $500 or less
canada.ca. The deemed disposition at death is not a T3 trigger: gains up to the date of death go on the final return
canada.ca.
One edge case does escape. An estate that earns $450 of interest and pays $90 to each of five resident beneficiaries, sells nothing and distributes no capital that year has no tax payable and meets none of the allocation tests, so no T3 is required for that year unless the CRA asks canada.ca.
Why a graduated rate estate that keeps any income has to file
A graduated rate estate (GRE) is taxed at the individual brackets, 14% on the first $58,523 for 2026 canada.ca, but it gets no basic personal amount. That is the gotcha. Tax starts at the first dollar, so any income the estate keeps creates tax payable, and tax payable alone requires a return
canada.ca. The credit limits are on the graduated rate estate page.
Worked example: your client died April 8, 2026. The executor picks December 31 as the year end, so the first T3 covers April 9 to December 31, 2026. The estate earns $6,000 of interest and pays $2,000 of it to the daughter in December 2026.
| Step | Amount |
|---|---|
| Interest earned April 9 to December 31, 2026 | $6,000 |
| Paid to the daughter in 2026, deducted by the estate | $2,000 |
| Estate's taxable income | $4,000 |
| Federal tax at 14% ($4,000 x 14%) | $560 |
| Income on the daughter's T3 slip | $2,000 |
Three tests are met: tax payable, more than $500 of total income with an allocation, and more than $100 to one beneficiary. The return, the slip and the $560 plus provincial tax are due March 31, 2027. Had the executor paid out all $6,000 in 2026, the estate's federal tax would be $0, but it still files and issues a $6,000 slip. Had the executor waited until January 2027 to pay the daughter, the estate would pay $840 federal on all $6,000 for 2026.
What tax year does the estate's T3 cover?
The final T1 covers income up to the date of death, and the estate's income after death goes on T3 returns for each later year until the property is fully distributed canada.ca. A GRE's first year end can be any date up to one year after death; a testamentary trust that isn't a GRE uses December 31
canada.ca.
| Event | Effect on the T3 |
|---|---|
| Executor picks the first year end | Any date up to one year after death, shown on the first T3 |
| Third anniversary of death | GRE status ends; file a stub T3 if the year end isn't the anniversary |
| Final distribution of the property | The estate's tax year ends that day |
| Each year end | Return and balance due 90 days later |
The CRA lists the 36 month cutoff, the stub return and the final distribution year end on its estate due dates page canada.ca. The 90 day rule is paragraph 150(1)(c) of the Income Tax Act
laws-lois.justice.gc.ca. Dated examples, the weekend rule and the leap year trap are on the T3 filing deadline page.
A GRE doesn't pay instalments canada.ca. It's also listed in s.150(1.2)(j) among the trusts excluded from the rule that makes most express trusts file every year, so it files only when a test in the first table is met
laws-lois.justice.gc.ca.
How do payments to beneficiaries move the tax off the estate?
Income that becomes payable to a beneficiary in the year is deducted by the estate under s.104(6) and taxed to the beneficiary under s.104(13). An amount counts as payable only if it was paid in the year or the beneficiary was entitled in the year to enforce payment, under s.104(24) laws-lois.justice.gc.ca. That's why the January payment in the example above lands back in the estate.
Allocations go on Schedule 9, and amounts allocated there are generally deducted from the estate's income canada.ca. A resident beneficiary gets a T3 slip, while income allocated to a nonresident beneficiary is reported on an NR4 slip, not a T3 slip
canada.ca. See Schedule 9, the T3 slip boxes and the NR4 deadline.
When a personal trust such as an estate distributes property to a beneficiary, the CRA considers it to have received proceeds equal to the property's cost amount, unless the trust elects under s.107(2.001) not to use that rule. For a distribution of property other than cash, send the CRA a statement with the fair market value and cost amount canada.ca. Get a clearance certificate before the final distribution.
What goes with the first T3 for an estate?
With the first return, send a copy of the signed will and, for a testamentary trust, a list of the assets held at the date of death canada.ca. An estate that designated itself as a GRE uses trust type code 903; other testamentary trusts generally use code 900
canada.ca.
You need a trust account number to file electronically. If the first return goes on paper without one, the CRA assigns a number and shows it on the notice of assessment canada.ca. The application route is on the T3APP page.
Sources
Does the estate need a T3 if it holds the house and sells it after death?
Does a CPP death benefit paid to the estate force a T3?
Not on its own. If it's the estate's only income after death, a beneficiary can report it instead canada.ca. If the estate files a T3 anyway, the benefit goes in other income
canada.ca. Details are on the CPP death benefit page.
Can the estate file its first T3 before it has a trust account number?
Yes, on paper. The CRA assigns a number with the notice of assessment, but electronic filing needs the number first canada.ca.
Does the estate still file once GRE status ends at 36 months?
Yes, if a filing test is met. It becomes a testamentary trust with December 31 year ends, and GRE status ending triggers its own stub return when the year end isn't the anniversary of death canada.ca. Rates for that stage are on the trust tax rate page.
General information for the tax year shown, not advice for a specific client. Confirm the facts before you file or remit.