When someone passes away, one of the first legal issues that arises is whether probate is required and, if so, how much it will cost. Probate is a common and often unavoidable part of estate administration in Ontario, but understanding how it works can help estate trustees and beneficiaries avoid unnecessary delays and expenses.
Probate and Probate Fees
Technically, there’s no such thing in Ontario as probate. There used to be, but now we have the Estate Administration Tax Act. So, that tax is what we commonly refer to as a “probate fee”.
Also, “probate” or the actual application to Court for an appointment is now “an Application for the issuance of a Certificate of Appointment of Estate Trustee”. That was a “mouthful, so let’s just stick with the word “probate”.
What Is an Estate?
An estate consists of all assets a person owns at the time of death, including:
- Real estate
- Bank accounts and investments
- Registered and non-registered accounts
- Personal property and valuables
Not all assets form part of the probate estate, but those owned solely in the deceased’s name often do.
Who Administers the Estate?
An Estate Trustee is responsible for administering the estate. Their duties typically include:
- Gathering and valuing estate assets
- Paying debts and liabilities
- Filing final and ongoing tax returns
- Distributing assets to beneficiaries
Estate Trustees are appointed by a Will, or if there is no valid Will by the Court.
What Is Probate?
Probate, formally known as a Certificate of Appointment of Estate Trustee, is the Court process that confirms the Estate Trustee’s legal authority to act on behalf of the estate. Financial institutions, land registries, and other third parties often require probate before they will release or transfer assets.
Probate is commonly required:
- When assets are held solely in the deceased’s name, or
- When a person dies without a valid Will
Probate Fees in Ontario (Estate Administration Tax)
Ontario charges Estate Administration Tax based on the value of the estate that passes through probate.
Key points include:
- No probate tax is payable on the first $50,000 of estate value
- For estates over $50,000, tax is charged at 1.5% of the value above $50,000
- Estate values are rounded to the nearest $1,000
- Certain encumbrances, such as a registered mortgage, reduce the value of real property for probate purposes
- Unsecured debts (such as credit cards or lines of credit) do not reduce the probate value
In addition to the Estate Administration Tax, estates may incur:
- Legal fees
- Accounting and tax preparation costs
- Estate Trustee compensation
When Was the Tax on the First $50,000 Eliminated?
The Estate Administration Tax on the first $50,000 of an estate was eliminated effective January 1, 2020.
Before that date, Ontario charged:
- $5 per $1,000 on the first $50,000, and
- $15 per $1,000 (1.5%) on amounts above $50,000
Since January 1, 2020, estates applying for probate pay no tax at all on the first $50,000, with the 1.5% rate applying only to the excess.
Estate Planning Opportunities
While probate is often unavoidable, proper estate planning can sometimes reduce probate fees, depending on the nature of the assets. Strategies may include:
- Multiple Wills
- Trust planning
- Ownership structures and beneficiary designations
These strategies require professional advice.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com