Filing a terminal tax return
A “terminal tax return” must be filed for the year a person passes on. The bite can be hefty, because all registered plans are deemed to have been taken into income, unless they pass to a surviving spouse, and all capital gains crystallized for tax purposes. However, there are ways to reduce the tax bill.
One possibility, if there is a surviving spouse, is to make the maximum possible RRSP contribution for the year, assuming the decreased still has a plan and that contribution room is available. All carry-forward credits should also be used. If the estate is a large one, the trustee should seek the advice of a tax professional for other ways to cut the bill.