Probate Fees & Taxes

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When an estate in Ontario is probated, “probate fees” or as they are more commonly referred to in Ontario “estate administration tax” must be given to the state.

When an estate in Ontario is probated, “probate fees” or as they are more commonly referred to in Ontario “estate administration tax” must be given to the state.

These fees are paid from the estate in question and are not required to be paid by the executors or trustees of the estate.

 

How is Estate Administration Tax Calculated?

 

The value of the estate that is probated is used to calculate the amount of the probate fees as follows:

  • $5 per $1000 of estate assets up to $50,000, and $15 per $1000 of any estate assets over the value of $50,000

It is important to note that Estate Administration Tax (or EAT) is a tax on “assets” and not as is the norm in Canada an income tax.

Estate Assets – What Must be Included?

 

When it comes to the paying of EAT the deceased’s estate that is subject to probate is made up of all the assets which were owned by the deceased; the following must be included:

  • Any real estate that is owned in Ontario is included, minus the total value of any encumbrances that might be linked to that real estate. These could include such things as a mortgage or a lien. Therefore any outstanding values relating to a mortgage should be deducted, this includes HELOC, Lien or any charge that is registered against the land if it is located in Ontario Any real estate that was owned in “joint tenancy” where there is a right to survivorship in place, should not be included. In cases where there is real estate owned “as tenants in common” no proportionate value should be included either.
  • Any personal property that belonged to the deceased including:
    • Any and all investments (excluding any such items where there is a named beneficiary – for example pensions, TFSA’s, RRSP’s and RRIF’s where the beneficiaries are someone other than the estate)
    • Any and all bank accounts except for any that were held in joint names
    • Any and all vehicles including those of a recreational nature
    • Any collections such as coins, cards etc
    • Furniture

No deductions are made for any debts that are not protected by “encumbrances” against real estate in Ontario.

In the case of credit card debt, student debt, car loans, investment loans, margin debt, personal debt or tax arrears there will be no deductions made, unless the debt is secured with a charge against any real estate in Ontario. For mortgages or any other charge that is registered against a property that is located outside Ontario, there is also no deduction. You are not required to deduct the amount that has been secured if the debt has been secured with a lien or a charge against the land.

EAT is always assessed on the market value, at a fair rate, of the assets of the deceased. This is subject to probate on the date of death. When it comes to selling costs (for example real estate commission), there is no deduction. It is the responsibility of the estate trustee to document and retain any copies of the basis of the assessment made into the value of the estate, this should include any estimates that have been received from experts or appraisers. If the asset in question is not going to be sold to a purchaser at “arm’s length” to the estate (for example real estate of something such as art that is passed to a beneficiary), this is particularly important.

Exclusions

For EAT purposes the following are not considered to be assets of the estate, they do not need to be declared on an EAT return:

  • Real estate located outside Ontario
  • Any real estate subject to “joint tenancy with a right to survivorship” – on the death of one owner the title is not transferred the surviving owner simply becomes the sole owner
  • Any life insurances that is passed to a named individual
  • Any jointly held bank accounts

Paying the EAT

A certified cheque or money order is generally used to pay the EAT in full, at the point where the probate application is filled. Uncertified personal checks are not accepted.

On occasion, the EAT can be advanced as a loan that is made to the estate on behalf of the beneficiary or estate trustee. After probate, this loan is repaid from assets of the estate.

In cases where the EAT is a large amount, and insufficient funds are held by the trustees or beneficiaries of the estate that can be lent to the estate then there is a possibility that the funds to pay the EAT can be obtained from cash or investments that were held by the deceased. In order to do this, a request is made to the financial institution that they provide a bank draft. This should be payable to the Ministry of Finance in respect of the probate. The best way to achieve this is via a formal request from the probate lawyer who is assisting the estate trustee.

If a special application is made to the court, usually with the help of an estate lawyer, it is possible to obtain a deferral of EAT. These require care and are not done automatically. In general, is it necessary to show that there are no liquid assets in the estate but that Ontario real estate is a part of the estate. Deferrals usually have a time limit (e.g. 90 days), and it is necessary to have a personal undertaking from the trustees of the estate that payment will be made.

The EAT Return

The EAT return must be filed by the estate trustee in the 90 days following receipt of the Certificate of Appointment of Estate Trustee. All assets of value in the estate, to which EAT is applicable, must be listed in detail Filing a false EAT return is a serious offence.

Updates, Estimates and Refunds

A probate application may be based on an “estimated” value. When values are not known to the estate trustee before probate, this may be used.

It is the duty of the estate trustee to file and update the EAT application, and they should also pay any supplementary EAT that is due in an appropriate amount of time once the change in value becomes reasonably accepted to the estate trustee. It should be remembered that this is in respect of cases where the value of the estate was undervalued on death. When estate values appreciate following death, but before sale, this gain means a taxable income is applicable to the estate but there is no need to refile or for more EAT to be paid.  It is possible that an overpayment of EAT might be obtained; however, this is difficult to do and does not always succeed.

These fees are paid from the estate in question and are not required to be paid by the executors or trustees of the estate.

How is Estate Administration Tax Calculated?

The value of the estate that is probated is used to calculate the amount of the probate fees as follows:

  • $5 per $1000 of estate assets up to $50,000, and $15 per $1000 of any estate assets over the value of $50,000

It is important to note that Estate Administration Tax (or EAT) is a tax on “assets” and not as is the norm in Canada an income tax.

Estate Assets – What Must be Included?

When it comes to the paying of EAT the deceased’s estate that is subject to probate is made up of all the assets which were owned by the deceased; the following must be included:

  • Any real estate that is owned in Ontario is included, minus the total value of any encumbrances that might be linked to that real estate. These could include such things as a mortgage or a lien. Therefore any outstanding values relating to a mortgage should be deducted, this includes HELOC, Lien or any charge that is registered against the land if it is located in Ontario Any real estate that was owned in “joint tenancy” where there is a right to survivorship in place, should not be included. In cases where there is real estate owned “as tenants in common” no proportionate value should be included either.
  • Any personal property that belonged to the deceased including:
    • Any and all investments (excluding any such items where there is a named beneficiary – for example pensions, TFSA’s, RRSP’s and RRIF’s where the beneficiaries are someone other than the estate)
    • Any and all bank accounts except for any that were held in joint names
    • Any and all vehicles including those of a recreational nature
    • Any collections such as coins, cards etc
    • Furniture

No deductions are made for any debts that are not protected by “encumbrances” against real estate in Ontario.

In the case of credit card debt, student debt, car loans, investment loans, margin debt, personal debt or tax arrears there will be no deductions made, unless the debt is secured with a charge against any real estate in Ontario. For mortgages or any other charge that is registered against a property that is located outside Ontario, there is also no deduction. You are not required to deduct the amount that has been secured if the debt has been secured with a lien or a charge against the land.

EAT is always assessed on the market value, at a fair rate, of the assets of the deceased. This is subject to probate on the date of death. When it comes to selling costs (for example real estate commission), there is no deduction. It is the responsibility of the estate trustee to document and retain any copies of the basis of the assessment made into the value of the estate, this should include any estimates that have been received from experts or appraisers. If the asset in question is not going to be sold to a purchaser at “arm’s length” to the estate (for example real estate of something such as art that is passed to a beneficiary), this is particularly important.

Exclusions

For EAT purposes the following are not considered to be assets of the estate, they do not need to be declared on an EAT return:

  • Real estate located outside Ontario
  • Any real estate subject to “joint tenancy with a right to survivorship” – on the death of one owner the title is not transferred the surviving owner simply becomes the sole owner
  • Any life insurances that is passed to a named individual
  • Any jointly held bank accounts

Paying the EAT

A certified cheque or money order is generally used to pay the EAT in full, at the point where the probate application is filled. Uncertified personal checks are not accepted.

On occasion, the EAT can be advanced as a loan that is made to the estate on behalf of the beneficiary or estate trustee. After probate, this loan is repaid from assets of the estate.

In cases where the EAT is a large amount, and insufficient funds are held by the trustees or beneficiaries of the estate that can be lent to the estate then there is a possibility that the funds to pay the EAT can be obtained from cash or investments that were held by the deceased. In order to do this, a request is made to the financial institution that they provide a bank draft. This should be payable to the Ministry of Finance in respect of the probate. The best way to achieve this is via a formal request from the probate lawyer who is assisting the estate trustee.

If a special application is made to the court, usually with the help of an estate lawyer, it is possible to obtain a deferral of EAT. These require care and are not done automatically. In general, is it necessary to show that there are no liquid assets in the estate but that Ontario real estate is a part of the estate. Deferrals usually have a time limit (e.g. 90 days), and it is necessary to have a personal undertaking from the trustees of the estate that payment will be made.

The EAT Return

The EAT return must be filed by the estate trustee in the 90 days following receipt of the Certificate of Appointment of Estate Trustee. All assets of value in the estate, to which EAT is applicable, must be listed in detail Filing a false EAT return is a serious offence.

Updates, Estimates and Refunds

A probate application may be based on an “estimated” value. When values are not known to the estate trustee before probate, this may be used.

It is the duty of the estate trustee to file and update the EAT application, and they should also pay any supplementary EAT that is due in an appropriate amount of time once the change in value becomes reasonably accepted to the estate trustee. It should be remembered that this is in respect of cases where the value of the estate was undervalued on death. When estate values appreciate following death, but before sale, this gain means a taxable income is applicable to the estate but there is no need to refile or for more EAT to be paid.  It is possible that an overpayment of EAT might be obtained; however, this is difficult to do and does not always succeed.

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21 King Street West
5th Floor,
Hamilton L8P 4W7
Phone: 9057957757