Probate and estate administration taxes in Ontario
What is probate?
Probate is a process that authorizes an executor to distribute assets of a deceased’s estate. Where required, provincial governments grant this authority by issuing a probate certificate known in Ontario as a “Certificate of Appointment of Estate Trustee With (or Without) a Will”. The Ontario government charges a fee for the certificate based on the value of the deceased’s estate. Why were changes required? In the 2011 Ontario budget, the Ontario government indicated that they would tighten probate filing rules to enhance compliance by transferring administration of the fee from the Ministry of the Attorney General to the Ministry of Revenue/Finance. This change, which received Royal Assent in 2011 with a recently announced in force date of January 1, 2015, is expected to significantly alter the way Ontario’s probate fee is administered as the Ministry of Revenue (since merged into the Ministry of Finance) – the department which used to collect Ontario’s PST – has more defined processes for assessing and collecting tax revenue. Prior to January 1, 2015, when determining the value of an estate for probate purposes, detailed information regarding estate assets was not required when applying for a probate certificate. Executor(s) could provide a single amount representing the value of the deceased’s estate which, as long as the executor provided a sworn affidavit confirming the amount, was generally accepted for probate purposes. There was no requirement to provide supporting documentation to back up the asset value reported. Consequently, it was believed that asset values were being conservatively estimated, and in some cases, significantly underestimated.
What has changed and when do the changes take effect?
Effective January 1, 2015, executors who apply for a Certificate of Appointment of Estate Trustee With (or Without) a Will (ie. “Probate Certificate”) will be required to file an “Estate Information Return” with the Ministry of Finance within 90 calendar days after the Certificate of Appointment of Estate Trustee is issued by the government. That is, once the executor applies for and receives a Certificate of Appointment of Estate Trustee, the executor must submit a detailed Estate Information Return within 90 calendar days to provide details of how the estate’s value was determined. Failure to do so can result in a fine and/or imprisonment.
At what point are probate taxes paid?
It appears that probate taxes must still be paid at the time the Probate Certificate is requested (ie. at the time of application). So, the executor would still need to know, at that time, the value of the deceased’s estate. What is changing is the added responsibility of filing an Estate Information Return within 90 days of receiving the Probate Certificate. The Estate Information Return will, presumably, provide more transparency and accountability and provide the government with more details for assessment purposes. Note, Estate Information returns are not required for Probate Certificates requested before January 1, 2015. Also, it appears that returns would not normally be required if the estate does not need to be probated (which can occur if all assets pass outside of the estate or if assets are readily transferrable without requiring a probate certificate).