Estate Information Return This return is to be completed in addition to an application for a certificate of appointment of estate trustee submitted to the Courthouse (Ministry of the Attorney General). It is a simple form, and has not changed under the new regime. Canada, Tel: 613-238-8080 I agree that Ontario’s probate tax—the highest in the country and just slightly higher than British Columbia—is annoying. Estate taxes do not, by and large, affect the vast majority of Americans, but to those who plan to leave millions upon their death, it pays in spades to understand recent changes to federal estate tax laws so that you can avoid, or at least reduce, estate tax liability. In order to apply to the Court for a Certificate of Appointment in Ontario, an application form must be filed with the Superior Court. The amount of the fee is based on the total value of the property in your estate when you die. 5 ways to manage estate costs. It will be used by the Ministry of Finance to enforce compliance with the Estate Administration Tax Act, 1998. Probate is a term that is often used to refer to the Estate Administration Tax (EAT), that is levied by the Ontario government of the estates of some deceased persons where the estate is worth $50,000 or more. The fees can be as high as approximately 1.5 per cent in Ontario, to no fees in Quebec (for notarial wills). Gifts to purchase a home also can be a problem. Charles Ticker is a lawyer with over 35 years of experience. “Because you report 20% capital gain each year, it may allow you to stay in a lower tax bracket whereas if you record 100% of capital gain in one year that could bump you into the top tax bracket and in a province like Ontario you’d pay 53.5% tax on taxable capital gains in the top bracket.” John Peart is a partner with the Ottawa law firm of Nelligan O’Brien Payne LLP and part of its Wills and Estates Group. The change may be more expensive than you think. In most cases, spouses, however defined, arrange their assets so that both jointly own their home, have joint bank accounts, have investments in joint names or with each other as named beneficiaries and have each other as named beneficiaries, on life insurance/death benefit policies and RSPs/RIFs. For example, a testator may decided to make his or her adult children joint tenants on a bank account. Many techniques exist to minimize probate fees, but many require proper planning by the testator prior to death. Amount based on estimate (3) If the applicant is able only to estimate the value of the estate when making the application, the amount to be deposited shall be based on the estimated value. Any probate tax that is payable is not deductible in calculating income or capital gains taxes. ON, So be careful about distributing all of the assets of an estate before assessing what tax owing might result. Once your Will is signed, be very careful in making changes in asset ownership simply to save a few dollars in probate taxes. These ways to avoid probate taxes are often based on a complete misunderstanding of the law. Nelligan Law is the name and brand under which the members of Nelligan O’Brien Payne LLP provide legal services. The intent is that this is part of the child’s inheritance and by giving it now, it avoids probate taxes and helps the child. real estate). Calculating estate administration tax on an estimated estate value. Learn about income tax returns, consumption taxes, and the programs and credits for individuals, self-employed persons and members of a partnership. The proposed changes, announced Thursday … For example, a primary will contains all the assets that will need to be probated (e.g. But even then, the fees are just 1.5% on estates exceeding $50,000. Free eBook on Probate in Ontario. This type of bad planning might take the form of transferring the family home into the names of the parents and one or more children (who may or may not live in the family home any more) as joint owners. The provincial tax is roughly 1.5% of the value of the probate estate. It is not nearly as large as income taxes on death, but it is still about $15,000 for every $1 million in the estate, with some exceptions. probate fees) of approximately 1.5% of the value of the deceased’s estate are payable during the certification process. Most of the problems arising from attempting to avoid probate taxes can either be avoided or dealt with if a person seeks advice from a lawyer beforehand: The Supreme Court of Canada has said that if an investment is truly to be held by a parent and child with the parent’s intention that the investment form part of the parent’s estate on the parent’s death, there should be documentation reflecting this intention. Avoid Probate Taxes at your Peril – How Not to Plan your Estate. Unfortunately, the surviving spouse was not capable of making a revision to his/her Will and the assets, subject to a Court challenge were lost to the deceased’s spouse’s children. In Ontario, probate fees are: Not what the parent might have wanted. Great weather, like avoiding probate taxes, is wonderful. But what happens if one or more of the children die before the parents, or one of the children has creditors, or wishes to purchase their own home, or separates from his or her own spouse, or the parents want to sell the home? 1990, and such conveyances are not subject to the tax. Name beneficiaries on your life insurance policies. If a child who is a joint owner wishes to purchase his or her own home, he or she will have possibly lost the Ontario Land Transfer Tax Credit of $2,000 to which first time Ontario homebuyers are eligible. How to avoid capital gains tax in Canada when selling property ... Here’s an example. What is Estate Administration Tax Estate Administration Tax, commonly referred to as probate tax or probate fees, is payable on the gross value of a deceased’s worldwide estate (less any mortgages on real estate located in Ontario) other than real estate located outside of Ontario. We strongly recommend that you avoid these ‘joint tenancy to avoid probate tax schemes’ unless you: If you want proper advice that structures your estate in a way that is tax efficient and effective, please contact us. If all of the beneficiaries of a Canadian estate are resident in Canada, administration of an estate is relatively straightforward. A few years ago, I acted for a couple who had both lost their spouses and had just been married. In Canada, there is no inheritance tax. While death and taxes may be life’s only certainties, people generally dislike paying taxes. The risk of a problem arising far outweighs the probate taxes that might be otherwise saved. Tax on capital gains If you require a Certificate of Appointment of Estate Trustee, the estate administration tax (EAT) must also accompany the application to the Ontario Superior Court of Justice. However, many other ‘plans’ designed to minimize probate fees are in fact very bad planning, which create for more trouble and cost than they avoid. No. When a person dies they may leave behind belongings, real estate and other assets which is called their estate. To serve you, we have offices across the Greater Toronto Area – Toronto, Scarborough, Markham and Mississauga. 2. When a person dies, their assets are managed by an estate representative. Purchase life insurance. This article provides some background on the EAT, discusses the changes that occurred and how life insurance products can help people deal with the new regime. Changes for Ontario’s Estate Administration Tax On January 1, 2013, a new audit and reassessment regime went into effect for Ontario’s Estate ... Each strategy must be used properly, though, to avoid problems, and anyone contemplating the use of these strategies must obtain appropriate tax … Alberta residents are fortunate because the probate fees in Alberta are amongst the lowest in the country, and the maximum is capped at only $525. An attorney can guide you through the process of finding ways to ensure your heirs or … Recent revisions to the Estate Administration Tax Act (Ontario), under which the Province charges tax of approximately 1.5% of the value of an estate when a will is probated by the court (colloquially “probate fees”), should be of concern to everyone because of the new reporting, enforcement and penalty provisions in the Act, explains Susannah B. Roth of O’Sullivan Estate Lawyers. On an estate with assets of $500,000, Ontario will levy probate taxes of just under $7,500 (there is a slight sliding scale on the first $50,000 of assets but for discussion purposes, the percentage of 1.5 per cent is used). The less property you have in your estate when you die, the lower your probate fees. This means that the estate pays the taxes owed to the government, rather than the beneficiaries paying. Did not notice any comments regarding the Estate Administration Tax (Ontario) where (after 2020-01-01) the estate administration tax will be calculated as $15 for every $1,000 (or part thereof) of the value of the estate over $50,000. Proper tax planning before death can substantially reduce or even eliminate Estate Administration Tax. Any person who receives an Estate Certificate (also known as Probate) after January 1, 2020, is required to file an Estate Information Return within 180 days. Amount of deposit (2) Subject to subsection (3), the amount to be deposited is an amount equal to the tax that will become payable by the estate under this Act. As death and death taxes occur at the same time, you may find that in this situation a significant portion of your income is taxed in a top tax bracket and therefore could lose about 45 percent to the CRA. The current Ontario Government has implemented a couple of changes to the calculation of Estate Administration Tax (“EAT”, often called probate fees) and the process for EAT refunds which are due to take effect January 1st. One way to avoid payment of probate tax by the estate is to transfer assets — such as bank accounts and real estate — into the joint names of … (2) This section extends to cases where a grant of probate of the will or of administration to the estate of the deceased may not have been made within the period after the death of the testator or intestate within which a caution is required to be registered. For instance, for bank accounts held in joint tenancy between a parent and adult child, the presumption is that the account IS part of the estate and must be probated – the onus of proving that the bank account is a gift to the adult child and not part of the estate lies on the adult child. But if you’d been charged personal or business income tax, you would’ve had to pay $30,000 (assuming the same marginal tax rate; more if this income pushed you into a new tax bracket). This is as per the Ontario 2019 Budget. A parent buys a life insurance policy with the intent to divide it equally between the parent’s two children. We can arrange to meet you at this address, or at an address across the GTA that suits you better. Ottawa, ON CANADA K2H 9G1, Kanata office: One of the spouses later died and, by right of survivorship, the surviving spouse received almost all of the deceased’s spouse’s assets to the detriment of the children of the deceased’s spouse. f: 1 (866) 397-9227, Probate in Ontario If a child who is a joint owner separates from his or her own spouse the child’s share of the parents’ home might form part of the child’s matrimonial property–and more so if the child and his or her spouse have been living in the home with the parents. For instance, a remarkable number of people think that it is a good idea to put ownership of houses and bank accounts in ‘joint tenancy’ with one of their children solely to avoid estate administration tax, but these attempts often create truly bizarre, unwanted, and sometimes completely unjust results – with one or more children or other beneficiaries potentially being deprived of their rightful share of the estate. A client came into see me and wanted to transfer title to his property from his parents name to his and his wife. If your goal with the transfer is to avoid estate administration tax (probate), remember that this cost may not be that costly after all. The most common effective planning technique to employ prior to death to minimize probate tax is the use of ‘dual wills’, whereby assets that require probate pass under one will, and other assets that often do not require probate (such as the shares of a family or private business) pass under a separate will that is not subject to probate. Estate Administration Tax: An Overview Before Applying for a Certificate of appointment of Estate Trustee. In most cases, that person is the grieving spouse or children. Estate Administration Tax (Ontario) The Estate Administrative Tax (probate fees) are payable on the total value of the assets that are being probated. Several years ago, the Supreme Court of Canada issued two decisions that said a bank account that is jointly owned does not necessarily become the property of the parent’s estate but, depending on the specific fact situation, can just as easily become the sole property of the surviving child. He has helped executors administer … In Ontario, an estate trustee is the only person with the legal authority to manage or distribute an estate. Toll-Free: 833-892-3331 These ‘joint tenancy’ tactics invite hard feelings and expensive litigation; the potential savings (1.5%) are trivial, and the potential costs massive. Usually this has been done to the detriment of the beneficiaries and is often the result of a discussion that a family member has had with a friend, bank employee or other person. This amount is hardly worthwhile to put your entire estate plan into jeopardy. This replaces probate fees with taxes called estate administration tax . Of course, this requires advance planning and preparation by the testator (the person making the will), and, a lack of dispute among the potential executors and beneficiaries. If the family home is jointly owned by the parents and a child who dies before the parents, that child’s share of the home could evaporate to the benefit of the parents and any other children who are also joint owners. Conveyance of property from trustees to beneficiaries is one of the exemptions provided for in the Ontario Land Transfer Tax Act R.S.O. • Ontario estate administration tax (“EAT”) is essentially equal to 1.5% of the value of the assets passing under probate (Estate Administration Tax Act, 1998) • Probate, or a Certificate of Appointment of Estate Trustee with a Will is generally required to transfer assets in 15th Floor, 4 Robert Speck Parkway Estate taxes do not, by and large, affect the vast majority of Americans, but to those who plan to leave millions upon their death, it pays in spades to understand recent changes to federal estate tax laws so that you can avoid, or at least reduce, estate tax liability. For your property to qualify for the preferential capital gains tax rate, you must not be in the business of investing in real estate. What problems are you creating if you die without a Will? © Copyright - Miltons IP - All Rights Reserved 2020, Home ownership: joint tenants and tenants in common, Beneficiary designations: TFSA, RRSP, RRIF, pension, insurance, Dependent support obligations and challenges, Wills and marriage, divorce & re-marriage, Retention, revocation and destruction of wills, Disputes about actions of an attorney for property, Estate administration / executor services. Life insurance can be a handy estate planning tool. This is very good because Ontario’s probate tax is only levied on those assets that are transferred pursuant to the deceased’s Will. swear or affirm the estimated value of the estate stated on your application form. “You might actually save tax overall because of how graduated tax rates work,” said Natale. If letters probate are not required in a deceased’s estate, no probate tax is levied or payable. Still, many people despise the Ontario tax, which tripled in the early 1990s. John is Certified as a Specialist (CS) in Estates and Trusts Law by the Law Society of Upper Canada and is also a member of the International Society of Trust and Estates Practitioners. Acting as an Attorney for Property – Know these top 10 tips. All Rights Reserved. Doing estate planning solely to avoid the probate process and probate fees is like choosing the place you retire based solely on the weather. After death, depending on the circumstances, it is from time to time possible to avoid probate entirely or reduce the amount of Estate Administration Tax if the estate can be reduced before probate. By Five Mistakes To Avoid In Estate Administration. The changes will affect all estates that go through the Ontario probate process. Probate /Estate Taxes in Ontario Executor’s Checklist For those parents who want to give money to a child to purchase a house, it is better for the parent to have loaned (with a signed promissory note or registered mortgage) the money to the child and spouse with possibly a provision in the parent’s Will to forgive the loan as part of the child’s inheritance. When questioned, the parent will often say that it is to avoid probate tax and, when further questioned, the parent will also say that the joint ownership will not be a problem as the child who is the joint owner will certainly share the account or GIC with his or her siblings as in the parent’s Will. Estate Administration Tax. 1998, c. 34, Sched., s. 2 (1). One of the pieces of legislation governing estate administration in Ontario is the Estates Administration Act. To serve you, we have offices across Ottawa. What is inheritance tax? There are several ways to minimize or avoid provincial estate administration taxes. + read full definition) equal almost 1.5% of your estate’s value. You do so, however at your peril. It was a complex Will but it reflected the couple’s wishes. For parents who wish to make only one of the children a beneficiary under an insurance policy to avoid probate taxes, don’t do it. Recent revisions to the Estate Administration Tax Act (Ontario), under which the Province charges tax of approximately 1.5% of the value of an estate when a will is probated by the court (colloquially “probate fees”), should be of concern to everyone because of the new reporting, enforcement and penalty provisions in the Act, explains Susannah B. Roth of O’Sullivan Estate Lawyers. Ontario’s probate tax is 1.5 per cent of the value of the assets that make up the deceased’s estate. t: 1 (888) 995-0075 MARITAL TRANSFERS. As such, executing multiple wills in order to avoid paying estate administration taxes has become a common estate planning tool. 555 Legget Drive Your Situation Low income, owner, parent, student, support payments… Income Tax Return Online filing, deadline, line-by-line help… 1990, c. E.22, s. 11 (2). Find out more. But then, Ontario also levies taxes on gasoline and alcohol, which are proportionally much higher. This bit of knowledge can sometimes be a dangerous thing. Kanata, ON K2K 2X3, St. Laurent office: These taxes or fees can vary considerably from province to province. Legislation: Estate Administration Tax Act. In many cases involving second marriages, changing asset ownership to joint names to avoid probate taxes is simply a bad idea and one that should be avoided. Estate Information Return This return is to be completed in addition to an application for a certificate of appointment of estate trustee submitted to the Courthouse (Ministry of the Attorney General). 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