Are Business Interests and Shares Counted for Estate Tax in Ontario?

Inheriting a private company or an investment portfolio raises two questions: does it count toward Ontario's probate tax, and how is it valued? The answers matter because the value you report on the application drives the Estate Administration Tax the estate pays.

This article covers the general rules in plain language. It explains what is counted, what is left out, how assets are valued, and what the estate representative has to do afterwards. Valuing a business can be complex, so professional help is often sensible.

What counts toward the estate's value

The estate's value includes investments, business interests and other property wherever situated. Property held in another person's name is also included. So shares in a private company, or an interest in a business, are generally part of the total.

• Bank accounts, including accounts at foreign banks
• Investments, and business interests
• Vehicles and vessels wherever located
• Ontario real estate, at its appraised value on the date of death, less encumbrances such as mortgages or liens
• RRSPs, RRIFs and TFSAs where the estate is the beneficiary
• Insurance, if the proceeds are payable to the estate

The tax applies only if probate is applied for and the certificate issues. For applications on or after January 1, 2020, no tax is payable on an estate worth $50,000 or less, and above that the tax is $15 for every $1,000 (or part thereof) of value over $50,000. The estate's value is rounded up to the nearest thousand dollars to calculate the tax.

What is left out

Some property is not counted, because the deceased no longer owned it at death or because the rules exclude it. Each of these has its own exception, so the details of how the asset was held matter.

• 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

Tenants in common are treated differently from joint owners. When a tenant in common dies, their share does not pass automatically to the other owners, and it counts toward the estate's value if probate is sought. How your business interests or shares were held can change the result, so it is worth confirming with a lawyer.

How assets are valued

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.

Estate representatives must be able to back up the asset values with supporting documents, such as statements or an appraiser's opinion of value. For complex assets, a professional appraiser with expertise in that area may help recommend a value.

How a particular private company should be valued depends on its facts, so confirm with an accountant or appraiser.

Secondary wills and limited certificates

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. Whether this approach suits your situation depends on the facts and the wills, so ask a lawyer.

Other certificates have their own rules. For resealing, ancillary and foreign nominee certificates, only assets located in Ontario are used to calculate the tax.

Debts, the return and later changes

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

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 that deadline falls on a weekend or holiday, it moves to the next business day. Filing online is recommended, and the return can also be filed by mail, courier, fax or in person.

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. A representative who fails to file, or who makes false or misleading statements, may be fined at least $1,000 and up to twice the tax payable by the estate, imprisoned for up to two years, or both.

What to do next

• List all shares, investments and business interests, and note how each is held.
• Gather statements and any appraisal showing value at the date of death.
• Ask a lawyer whether a limited certificate or secondary will is relevant.
• Ask an accountant or appraiser about valuing a private company.
• Keep supporting records for four years.

If you are unsure whether an asset counts, or how to value it, confirm with a lawyer or accountant before you file the probate application.

Frequently asked questions