What is Estate Administration Tax (aka Probate Fees)

Estate Administration Tax

Many people refer to “Probate Fees” as the fees payable to the government when applying for Probate. The correct term is Estate Administration Taxes.

When applying for Probate, the Estate Trustee must determine the value of the estate. In many situations, appraisals may be required to determine the value of assets. After Probate is granted, the Estate Trustee must file an Estate Information Return.

An Estate Information Return (the Return), must be filed with the Ministry of Finance within 180 days after Probate is issued. The Return requires the Estate Trustee to provide details of all of the assets of the estate, the value of the assets, and to calculate the appropriate Estate Administration Tax (the Tax) payable. The Tax is imposed on the estate of the deceased person. The Tax is paid as a deposit when the Estate Trustee applies for Probate with the Superior Court of Justice. The Estate Trustee must certify that the document is true, correct and complete.

The Estate Administration Tax Act (EATA) imposes an obligation on the Estate Trustee to provide financial information about the estate to the Ministry. The financial information is used by the Ministry to confirm that the appropriate estate administration tax has been paid by the Estate Trustee on the assets of the estate.

The Ministry of Finance has four years from the date that the tax became payable to reassess the estate. Under the provisions of the EATA, the Estate Trustee can face penalties for failing to comply with the Act and/or for misrepresenting the value of the estate. Penalties include a fine of at least $1000 or up to twice the tax payable by the estate, or imprisonment for not more than two years, or both.

There is also a requirement on the part of the Estate Trustee to maintain records in the event of a reassessment of the estate by the Ministry of Finance.

In the event that the Estate Trustee discovers that there was an error in the filing of the Return, he or she can file an amended information return. The amended information return should be filed within 60 days of discovery of the error.

How Is Estate Administration Tax Calculated?

Estate administration tax is charged on the total value of the deceased's estate. The total value of the estate is the value of all assets owned by the deceased at the time of death, including but not limited to:

• real estate in Ontario (less encumbrances)

• bank accounts

• investments (e.g., stocks, bonds, trust units, options)

• vehicles and vessels (e.g., cars, trucks, boats, ATVs, motorcycles)

• all property of the deceased which was held in another person's name

• all other property, wherever situated, including:

• goods,

• intangible property,

• business interests, and

• insurance, if proceeds pass through the estate (e.g., no named beneficiary other than 'Estate'.)

Encumbrances against any assets other than real estate cannot be deducted from the value of the assets.

Items not to be included in the calculation of Estate Administration Tax:

• assets that the deceased had before death but not at the time of death (e.g., insurance payable to a named beneficiary)

• assets where there is joint ownership with right of survivorship

• real estate outside of Ontario

If the court issued a Certificate of Appointment of Estate Trustee with a Will Limited to the Assets Referred to in the Will, only those assets included in such will, are to be included.

I hope this information is helpful. If you have any questions, please do not hesitate to contact me.