Do I need a clearance certificate before distributing my mother's estate?
You need it to protect yourself. Clearance is the confirmation that the tax the authority is looking for has been assessed and satisfied, and an executor who distributes without it can be left personally liable for whatever is later found owing, after the money has gone to beneficiaries who may not return it. That is the whole point of the document. It is requested once the returns in question have been assessed, which in a cross-border estate means after the foreign filings and any credits have settled, so it is realistically the last step in the administration rather than a formality at the end.
How long does clearance take when the estate has foreign assets?
Longer than the domestic timetable alone would suggest, because the request cannot sensibly be made until the figures are final, and figures that depend on a foreign tax credit are not final until the foreign authority has assessed. The sequence is therefore fixed by the slowest jurisdiction: value, file abroad, obtain the foreign assessment, settle the credit at home, wait for the assessment here, then request clearance. Executors who apply early in the hope of saving time usually lose it, because a request made on provisional figures has to be redone. We map the order at the start so the family knows what is waiting on what.
What is the difference between the terminal return and the estate's returns?
The date of death divides them. The terminal return covers the deceased's own income to that date and the deemed dispositions triggered by it. Everything afterwards belongs to the estate, which is a separate taxpayer with its own returns for the period it exists. Executors frequently blur the two, reporting post-death income on the terminal return or leaving the estate's returns unfiled altogether, and clearance then stalls because the filings the request refers to do not cover what actually happened. Getting the split right at the outset is far easier than unpicking it, and it also determines where a foreign credit is claimed.
Can I pay something to the beneficiaries before clearance arrives?
Often yes, but the judgement is yours and it is about what you keep back rather than what you release. Personal liability attaches to distributing before the tax is settled, so an interim distribution is defensible only if the amount retained is enough to meet the open positions, including any foreign tax still to be assessed. We size the holdback against the specific items that remain unresolved and set out the reasoning in writing, so the executor has a record of the basis on which they acted and the beneficiaries can see why a balance is being held.
Does a clearance certificate cover the estate's own tax as well?
Not automatically. A certificate covers the returns and periods the request identifies, so one obtained for the deceased's own filings says nothing about the estate's later returns. That is why executors in a longer administration commonly make two requests: one covering the terminal position, and one on the wind-up, when the estate's final return has been assessed. Reading a certificate as though it clears everything is a real risk, because distribution then proceeds on a protection the document does not give. Check what the certificate names before relying on it, and keep it with the return it refers to.
What records will be wanted before clearance is granted?
An inventory of what the deceased owned as at the date of death with values attached, the evidence for those values, the returns themselves and the assessments on them, and an account of what has been distributed and what is held back. In a cross-border estate, add the foreign filings and the assessments that fix any credit. The work is mostly assembly, and it is far easier done as you go than reconstructed at the end from bank statements. We keep that file from the first meeting, because it is the same file the executor needs if a position is ever examined.
I have not filed for several years while living abroad — what are my options?
Both countries have routes back, and using one before they contact you is what preserves the relief. On the US side there are procedures aimed at taxpayers whose failure was not wilful, including one designed for people living outside the country, and separate procedures for late account reports and information returns alone. Canada has its voluntary disclosures programme and taxpayer relief for penalties and interest. Filing quietly and hoping is the one approach with no protection attached to it. See catch-up filing.
Do I pay tax when I inherit property abroad?
The inheritance itself is often not income to you, but three other things can create tax: the estate may owe tax where the deceased or the property was situated, some countries tax the recipient directly, and the gain from the date you inherit to the date you sell is yours. Reporting obligations can also attach to holding the asset. See inheriting property abroad.
