Income After Death

What happens with income earned after death? Most payments received by the deceased after death will have to be returned.

For example, GST, CTB, OAS, and CPP Disability or Pension cheques should be returned if they relate to a period after the death of the taxpayer. The following types of income earned or paid after death should be reported by the estate on a T3 return:

• Salary or wages paid for the period after death.
• Severance pay received because of death (as a death benefit, the first $10,000 may be non-taxable). If this amount is paid on the employee’s death to recognize service in an office or employment, it can be received by the deceased’s testamentary trust, in which case the trust may exclude up to $10,000 from income; the same is true if the amount is received by a single beneficiary. If it is received by several beneficiaries the $10,000 exempt income amount must be shared proportionately.
• Future adjustments to severance pay.