Death benefit: Be careful because it is taxable

Retraite Québec will pay an amount of up to $2,500 to cover funeral costs. But be careful, there are criteria that must be respected and you should know that this service is taxable.

Marie-Josée, one of our readers, recently wrote to us to learn more about Retraite Québec’s death benefit. She is surprised that at the time of her mother’s death and, a few years later, her brother’s death, she had to pay taxes on the $2,500 benefit awarded in both cases. She wonders whether there was no mistake and whether the government has the right to claim taxes on this amount.

François Boulanger, actuary and program development coordinator at Retraite Québec, tells us what it is.

To whom is the benefit paid?

It is important to understand that the death benefit is not intended to cover all funeral costs. It should be viewed as a supplement rather than a full cost recovery. By starting from this principle, we avoid possible disappointments.

Who receives the granted amounts? The person or charity who paid the funeral expenses or the heirs. Other people can also touch it if there are no heirs or if they have renounced the inheritance.

“In the first 60 days after death, the benefit is reserved for the person paying for the funeral. This can be a family member, but not necessarily a third party. You must submit the application together with proof of payment of the funeral costs,” explains François Boulanger. If the fees are less than $2,500, the difference could be allocated to heirs who request it, provided they have not renounced the inheritance.

From the 61st day and up to five years after death, if no application has been made, the benefit is paid to the first person who claims it: payer of funeral costs, executor of the estate, heir or another person.

Who pays the tax?

To answer our reader’s question: Yes, the amount of the gift is taxable and must be reported in estate income, regardless of who the gift was paid to. “It is not the person who received the check that is taxed, but rather the estate that pays tax on this amount when filing its tax return,” explains François Boulanger. If the estate is insolvent, no taxes are due.

Please note that most thanatologists can request the service directly from Retraite Québec.

Under what conditions are you entitled to the benefit?

To be eligible for the benefit, the deceased must have contributed to the QPP for a sufficient period of time, i.e. For example, if a person dies at the age of 29, their contribution period is 12 years (between 18 and 29 years). In this case, she must have made contributions for a third of her contribution period, i.e. four years.

The contribution period begins, regardless of whether you work or not, in the month after your 18th birthday or on January 1, 1966 if you celebrated your 18th birthday before that date. The deadline ends at the end of the month preceding the start of the QPP payment, or at the end of the month of the person’s 70th birthday, or at the end of the month in which the person died.

Even if the person has not paid for long enough, it is possible, under certain conditions, to apply to the Ministry of Employment and Social Solidarity for a special benefit to cover funeral costs.

ADVICE:

  • Good to know: Funeral care services that the person paid before their death are not eligible and cannot be reimbursed with the benefit. However, if a relative paid these costs on behalf of the deceased, they could receive a refund.
  • Several additional conditions and exceptions apply to the death benefit. Consult the Retraite Québec website here under the “Deaths” tab and then “Pensions and Benefits”.
  • To find out more about the special funeral expense allowance, visit the page here.

Originally posted 2023-11-15 00:50:14.


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