Bank Asks for Probate in Ontario: Can You Avoid the Estate Tax?

You are the executor, you have contacted a bank, and it says it needs a certificate of appointment (probate) before it will deal with the account. Your first worry is often the cost: will this trigger the Estate Administration Tax, and is there any way around it?

This article explains how the tax is tied to the certificate, how the estate's value is worked out, and which assets do not count. It does not say when a given bank will or will not require probate, because that depends on the institution, the account and the facts.

The tax follows the certificate

Ontario's Estate Administration Tax is charged only when an estate certificate is applied for and issued. If no certificate is applied for or issued, no tax is owed.

That means the tax decision and the bank's demand are linked. If the bank's requirement leads you to apply, the tax is paid as a deposit when the application is filed, and it becomes the tax once the certificate is issued. The tax is paid by the estate, not personally by the estate representative.

Whether another route is available with a particular bank is not something the tax rules answer. Ask the bank exactly what it requires in writing, and have a lawyer confirm your options before you apply.

When no tax is payable even with a certificate

For certificates applied for on or after January 1, 2020, no tax is payable on an estate worth $50,000 or less. Above $50,000, the tax is $15 for every $1,000 (or part thereof) of the value over $50,000.

Even when no tax is owed, the estate must still file an Estate Information Return after the certificate is issued. So a low-value estate avoids the tax, but not the filing.

What counts toward the estate's value

The value 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, investments, vehicles, business interests and other property wherever situated.

Some assets are left out. These are the ones most likely to reduce the tax base:

• Insurance paid to a named beneficiary, because the deceased no longer owned it at death.
• 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 certain RDSPs.

Other assets are included. RRSPs, RRIFs and TFSAs are counted where the estate is the beneficiary, and a tenant in common's share is part of the estate. Debts such as funeral expenses, credit cards and lines of credit do not reduce the value, because only encumbrances on real property can be deducted.

Applying and the paperwork

Probate applications, with or without a will, use Form 74A. It asks for the total value of real property, the total value of personal property and the total estate value. If there is no will, Form 74G Part B (consent to the applicant's appointment) is also needed.

A bond is required when the deceased died without a will, when the applicant was not named as estate trustee in a will, or when the applicant does not live in Ontario, another Canadian province or territory, or a Commonwealth country. The bond is generally double the estate's value unless a judge orders otherwise.

If the estate is valued at $150,000 or less, a small estate application may be available, using Form 74.1A filed with Form 74.1B and a draft Small Estate Certificate (Form 74.1C). Tax still applies to the value over $50,000.

What to do next

• Ask the bank in writing what document it requires and why.
• List every asset and note whether it passes by survivorship, by a named beneficiary, or through the estate.
• Get supporting documents for values, such as statements or an appraiser's opinion.
• Speak with a lawyer before applying, so the estate's value and the tax deposit are right.
• Diarize the Estate Information Return, due within 180 calendar days after the certificate is issued.

Frequently asked questions