Issued by the Canada Revenue Agency (CRA), a clearance certificate indicates that a deceased person has filled all of his tax obligations for previous years up to the date of his death. If you are an executor of an estate, you should not distribute any of the estate’s assets until after you have received the clearance certificate from the CRA. Without this certificate, you could be held liable for taxes owed.
For example, if you are the executor of your father’s estate and you choose to distribute all of his assets, you could be liable for those taxes if you have not yet obtained a clearance certificate and if the CRA decides that your father still owes taxes. If you are deemed liable but have already given everything away, you may be required to pay the taxes out of your personal funds.