When someone passes away, their estate becomes its own legal entity for tax purposes. If you are the executor, you are responsible for managing this entity, which includes filing an estate tax return. You should note that this return is separate from the deceased person’s final tax return and is filed using the T3RET form (T3 Trust Income Tax and Information Return). It reports any income earned by the estate from the time it’s created until the assets are distributed. Handling this filing correctly is crucial to ensure everything is in order.

For example, when George passes away, a final tax return must be filed to report his income from January 1 of that year up to the date of his death. If George owned assets such as property or stocks, the tax rules assume he sold all his assets at the time of his passing. In most cases, these assets are deemed to have been transferred to his estate. Any gains or losses resulting from this “deemed sale” must be reported on George’s final tax return. When the estate later sells these assets, the resulting gain or loss must be reported on the estate’s tax return, along with any other income the estate generates after George’s death.