Estate Administration Tax Audits and Reassessments in Ontario

If you are an estate trustee and the Ministry of Finance has contacted you about the Estate Administration Tax on an estate, it is natural to worry. Most of the time the questions come down to one thing: whether the value of the estate was reported correctly when probate was applied for.

This article explains the time limits the Ministry works within, what it usually looks at, and what you can do if you disagree with an assessment. The details of your situation matter, so a lawyer or accountant should review any notice you receive.

What the Ministry can look at

The Estate Administration Tax is charged only when an estate certificate (probate) is applied for and issued. The tax is paid by the estate, not personally by the estate representative. For certificates applied for 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.

An assessment or reassessment is really a question about value. The estate's value is rounded up to the nearest thousand dollars before the tax is calculated. Assets are valued at their fair market value at the time of death, and real property at its appraised value at the date of death, even if it later sells for more or less.

Time limits that apply

The Ministry of Finance may assess or reassess an estate's tax within four years after the day the tax was due. That limit does not protect every estate. If a return was not filed on time or a misrepresentation was made, the Ministry may assess or reassess at any time.

Common reasons for a reassessment

Reassessments often follow from how assets were counted. Knowing what belongs in the estate, and what does not, helps you check your own work.

• Included: Ontario real estate at appraised value less registered encumbrances, bank accounts, investments, vehicles, business interests and property held in another person's name.
• Included: RRSPs, RRIFs and TFSAs where the estate is the beneficiary, and insurance payable to the estate.
• Left out: jointly owned assets that pass automatically to the surviving owner, and insurance paid to a named beneficiary.
• Left out: registered plans with a beneficiary designation or declaration, real estate outside Ontario, and CPP death benefits.
• Not deductible: funeral expenses, lawyer's fees, loans, credit card debt and real estate commissions. Only encumbrances on real property reduce the value.

Disagreeing with an assessment

If you dispute an assessment, a Notice of Objection must be filed within 180 days from the day the Notice of Assessment was issued. Missing that window can make the dispute much harder, so note the date on the notice as soon as it arrives.

Your best support is paperwork. Estate representatives must be able to back up asset values with 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. The records supporting the return must be kept for four years at the estate representative's principal place of business or residence.

If the Ministry is right and more tax is owing, the additional tax can be paid to the Superior Court of Justice or the Ministry of Finance, with an affidavit setting out the revised value of the estate at the time of death. If the tax was overpaid, refunds of tax already paid are requested from the Ministry of Finance, and a refund requires an Estate Information Return filed within four years of the certificate.

What to do next

• Read the notice carefully and write down every date and deadline on it.
• Gather the Estate Information Return you filed, the Form 74A application and your valuation documents.
• Compare your asset list with the included and excluded categories above.
• If you find an error, ask about filing an amended return, which is generally due within 60 days of becoming aware of it.
• Speak with a lawyer or accountant before replying, especially if the notice mentions late filing or a possible misrepresentation, because penalties can apply.

Frequently asked questions