Is my inheritance taxable—and why did the estate send me a T3 slip?

Arsen Accounting Services · T3 guide · Sources checked October 29, 2026

Most gifts and inheritances are not reported as income by the person receiving them. However, income earned by an estate and allocated to a beneficiary can be taxable. A T3 slip may therefore relate to estate earnings rather than tax on the inheritance itself. CRA: Amounts not reported or taxed CRA: When to prepare a beneficiary T3 slip

Separate the inherited assets from later earnings

Ask the executor for a statement explaining your distribution. It should help distinguish the estate’s capital from income being allocated to you. The amount deposited in your bank account alone does not explain the tax character of every part of the payment.

Once you invest inherited cash, the income it earns is subject to the usual tax rules for the account and investment. CRA specifically distinguishes non-taxable inherited amounts from taxable income subsequently earned on those amounts. CRA: Amounts not reported or taxed

The estate may have its own income to report

After someone has passed away, their estate may earn interest, dividends, rent or gains on asset sales. These amounts need to be distinguished from income and tax consequences up to the date of passing. The final personal T1 and the estate’s T3 serve different purposes. CRA: Returns after someone has passed away CRA: Reporting income before and after passing

Do not assume a T5 or bank statement covering a whole calendar year belongs entirely on one return. The executor should provide the relevant dates and account history so the pre- and post-passing amounts can be identified.

Why a beneficiary receives a T3

Trustees generally prepare T3 slips for resident beneficiaries to whom income is allocated, subject to CRA’s reporting rules. The slip identifies the types of income for the beneficiary’s return. A T3 slip is different from the T3 return filed by the estate. CRA: When to prepare a beneficiary T3 slip

In many cases, income properly allocated to a beneficiary is deducted in calculating the trust’s income and included by the beneficiary. The will or trust terms, entitlement, payments and applicable rules matter. It is not simply a choice to assign income to whichever family member has the lowest tax rate. CRA: T3 trust guide and income allocations

Records beneficiaries and executors should keep

• The distribution statement and any accompanying explanation.
• T3 slips, amended slips and information about income allocated without a slip.
• Payment dates and whether property was transferred instead of cash.
• Estate statements identifying income and transactions after passing.
• Relevant cost and valuation records for inherited investments or property.
• Details of beneficiaries living outside Canada, for separate reporting review.

Common questions

Does no T3 slip mean there is nothing to report?

Not necessarily. CRA generally does not require a T3 slip for allocated income below $100, but the beneficiary must still be told about it and report it. Ask the executor about the nature of the payment. CRA: When to prepare a beneficiary T3 slip

Does every estate automatically need a T3 return?

No. The estate’s income, transactions and filing rules must be reviewed. The final T1 remains a separate question. CRA: Returns after someone has passed away

Does “inheritance” settle the treatment of an RRSP payout?

No. Registered-plan payouts and beneficiary arrangements need their own review. Bring the plan statement, beneficiary information and tax slips rather than treating every payment after a passing as the same type of inheritance. CRA: Reporting income before and after passing

Coordinate both sides of the reporting

Arsen Accounting can discuss estate T3 preparation and a beneficiary’s personal return. Executors can also use our existing executor checklist to organize the wider file. Mention your role and which returns are already completed.

Discuss your tax preparation