Written by Shannon Warawa, CPA, CA on May. 4, 2020
CPP death benefit
The CPP death benefit is a one-time, lump-sum payment to the estate of the deceased contributor.
The CPP death benefit can be paid to:
- The Estate of the deceased person
- The person who paid the funeral expenses
- A surviving spouse or common law partner
- A next of kin.
The Executor is the first person that can apply for the CPP death benefit. Only the Executor can apply in the first 60 days after death. After the 60 days, someone else can apply for the CPP death benefit, for example, the person who paid for the deceased’s funeral expenses. If this person applies before the Executor and after the first 60 days, the benefit will go to them. There is no time limit on when you can apply. Professionals at Will Writing London will be able to help you figure this out.
The CPP death benefit is taxable and must be reported by the deceased person’s Estate or the individual(s) who receives it. If received by the Estate, the benefit is reported on the CPP death benefit line of the Other Income and Deductions schedule on the T3 Trust income tax return. A $2,500 CPP benefit generates $625 in taxes payable by the Estate.
If received by an individual, the benefit is reported on line 114 of that individual’s personal tax return and the taxes payable on the benefit would depend on the income tax bracket that individual is in.
The CPP death benefit cannot be reported on the final T1 personal tax return of the deceased person.
Whether reported by the Estate or an individual, it is advisable that some amount of the benefit be reserved to cover the tax payment once the income tax return is filed.
For more information on the CPP death benefit, please visit the Government of Canada website.
For information on how to apply for the CPP death benefit, please visit Service Canada’s website. Information including how to get started, eligibility and acceptable documents for proof of death to send with your application, along with a fillable copy of the application form, are available here.
Payment from Service Canada takes approximately 6 to 12 weeks from the date the application is received. If you have any other questions regarding the CPP death benefit, please call Service Canada at 1-800-277-9914.
Survivor payment paid from a corporation
A corporation is also able to pay a survivor benefit of up to $10,000 to an employee’s estate or their beneficiary in recognition of that employee’s service or employment. The payment received will be considered non-taxable to the beneficiary but deductible to the corporation.
The amount of the payment should be reported in box 106 of a T4A slip and the slip issued to the individual or estate receiving the payment. The slip must be filed by the normal deadline for filing T slips, February 28th. The slip will be reported on that person’s return, but is not taxable.
If you would like more information or have any questions, feel free to contact us at 780.466.6204, or click here to send us an email.
Thanks to Shannon Warawa of KWB Chartered Professional Accountants for providing this content.
Shannon Warawa, CPA, CA
Shannon Warawa joined KWB in September 2005. She received her Bachelor of Commerce from the University of Alberta in 1999. After articling with PricewaterhouseCoopers for three years, she was employed with Howard Kirkpatrick Associates during which time she obtained her C.A. designation. Shannon is the first point of contact for the majority of clients handling the affairs of a deceased parent or spouse and would be happy to answer any questions and assist in the preparation of their final personal tax return.
In 2017, her name was added to the coveted Bunnock trophy when her team took 1st place in KWB’s 10th Annual Bunnock Tournament. In 2018, she defended her title with her office partner Haley.
Shannon works part-time, is married and has 3 children. Away from work, she enjoys camping trips with her family, reading, cheering at basketball, hockey and lacrosse games, book club and her weekly boot camp classes. She served as Parent Council Treasurer for many years at her children’s elementary school and continues to volunteer in her children’s schools whenever possible.
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