Assets That Avoid Estate Administration Tax in Ontario

When someone dies in Ontario, the estate may have to pay tax to obtain probate. Many families are surprised to learn that not everything the person owned is counted when that tax is worked out.

This article explains which kinds of property generally pass outside the estate and are left out of the value, and which kinds are still counted. How a particular asset is held matters a great deal, so check the details of your situation with a lawyer or accountant.

When the tax applies at all

The Estate Administration Tax is charged only when an estate certificate (probate) is applied for and issued. If none is applied for or issued, no tax is owed. The tax is paid by the estate, not personally by the estate representative.

For applications made on or after January 1, 2020, no tax is payable on an estate worth $50,000 or less. Above that, the tax is $15 for every $1,000 (or part of $1,000) of value over $50,000. That is why the value of the estate, and what is left out of it, matters.

The tax is paid as a deposit when the probate application is filed with the court, and once the certificate is issued the deposit becomes the Estate Administration Tax. To calculate it, the estate's value is rounded up to the nearest thousand dollars. Even when the estate is worth $50,000 or less and no tax is owed, the estate must still file an Estate Information Return after the certificate is issued.

Assets that are left out of the estate's value

Several categories of property do not count toward the estate's value. Each one has a condition attached.

• Assets the deceased no longer owned at death, such as insurance paid to a named beneficiary.
• Jointly owned assets that pass automatically to the surviving owner or owners.
• RPPs, RRSPs, RRIFs and TFSAs that have a beneficiary designation or declaration.
• Real estate outside Ontario, CPP death benefits, and RDSPs where the deceased was a subscriber but not a beneficiary.

When a joint tenant dies, the surviving co-owners inherit the deceased's share of the property. The type of certificate can also change what is counted. If the court issues a certificate limited to the assets in a specific will, only the assets in that will count toward the estate's value. For resealing, ancillary and foreign nominee certificates, only assets located in Ontario are used to calculate the tax.

Assets that still count

The value of the estate includes Ontario real estate at its appraised value on the date of death, less encumbrances such as mortgages or liens. It also includes bank accounts (including at foreign banks), investments, vehicles and vessels wherever located, property held in another person's name, business interests and other property wherever situated.

Some of the items that normally pass outside the estate come back in when the estate is the beneficiary. RRSPs, RRIFs and TFSAs whose beneficiary is the estate are included. Insurance is counted if the proceeds are left to the estate. A share held as a tenant in common does not pass automatically to the other owners, so it becomes part of the estate and counts if probate is sought.

Assets are valued at their fair market value at the time of death. Real property is valued at its appraised value at the date of death, even if it sells for more or less shortly after the death.

What you cannot subtract

Only encumbrances on real property can be deducted. Funeral expenses, lawyer's fees, loans and interest, vehicle debt, credit card debt, real estate commissions, unregistered loans and lines of credit do not reduce the estate's value. A mortgage, collateral mortgage or lien registered against real property in the estate can be deducted from that property's value.

What to do next

Estate representatives must be able to back up asset values with documents, such as statements or an appraiser's opinion of value. Start by sorting assets by how they are held.

• Gather account statements, policy documents and plan statements.
• Check who is named as beneficiary on each policy and registered plan.
• Check how each jointly held asset is owned.
• Obtain appraisals for real estate and any complex assets.
• Speak with a lawyer or accountant if ownership or a designation is unclear.

The estate representative must file an Estate Information Return with the Ministry of Finance within 180 calendar days after the estate certificate is issued. If information in a filed return turns out to be incorrect or incomplete, an amended return must be filed within 60 days of becoming aware of it, and this duty applies within four years of the certificate being issued. The Ministry may assess or reassess an estate's tax within four years after the day the tax was due, but if a return was not filed on time or a misrepresentation was made, there is no four-year limit.

Frequently asked questions