Estate Administration Tax on the First $50,000 in Ontario

If you are the trustee of a modest estate, a natural question is whether the first $50,000 is simply free of estate administration tax. The short answer for current applications is yes, but there are a few details that catch people out, including what counts toward the $50,000 and what paperwork remains.

This article explains how the exemption works, how it affects the filing, and where the Small Estate Certificate fits in. It is general information, and it is worth confirming your own numbers with a lawyer or accountant.

How the $50,000 exemption works

For estate certificate applications made on or after January 1, 2020, an estate valued at $50,000 or less is exempt from estate administration tax. If the estate is worth more, the tax is $15 for each $1,000 (or part thereof) of the value that exceeds $50,000.

Ontario's official example is a $240,000 estate, where the first $50,000 carries $0 tax and the remaining $190,000 is charged at $15 per $1,000, for tax of $2,850. Values are rounded up to the nearest $1,000 before calculating.

Older rules were different. For applications from June 8, 1992 to December 31, 2019, the rate was $5 per $1,000 on the first $50,000 and $15 per $1,000 on the excess, with a $1,000 exemption, and that $5 tier no longer applies to current applications.

Working out whether you are under $50,000

The test uses the value of the estate, meaning the value disclosed under section 32 of the Estates Act, less the actual value of encumbrances on real property. That is fair market value at the date of death, supported by documents such as statements or appraisals.

Many estates are smaller than they first appear because some assets never enter the estate. Jointly owned assets passing automatically to the other owner or owners are excluded, as are RPPs, RRSPs, RRIFs and TFSAs with a beneficiary designation. On the other hand, registered plans payable to the estate, bank accounts, investments, vehicles and insurance proceeds payable to the estate are counted.

• Only encumbrances on real property reduce the value.
• Funeral expenses, lawyer fees, credit card debt, vehicle debt and unregistered loans cannot be deducted.
• Real estate outside Ontario is excluded.

If your estate sits near the $50,000 line, a small difference in valuation can mean the difference between no tax and some tax, so keep the supporting documents.

What you still have to file when no tax is payable

The exemption removes the tax, not the paperwork. Even when the estate is $50,000 or less and no tax is payable, the Estate Information Return is still required. It must be filed within 180 calendar days after the certificate is issued, even if the estate value is $0. Records must be kept for four years.

The application itself also asks for values. Form 74A requires values of real property, personal property and total estate. Before a grant is issued, the applicant gives the registrar a sworn or affirmed statement of the total value of the property that belonged to the deceased at the time of death.

Failing to file, or giving false or misleading information, is an offence under the Act, although a reasonable-diligence defence exists. A return filed on time with accurate numbers is the simple way to avoid that problem.

The Small Estate Certificate and the exemption

A Small Estate Certificate is available for estates valued up to $150,000, while larger estates use a certificate of appointment of estate trustee. It is sometimes thought of as the simplified route, but it is a different question from the tax exemption.

Under the Act, an estate certificate includes a certificate of appointment of estate trustee, including a small estate certificate. Tax is payable upon the issuance of an estate certificate. So an estate that uses a Small Estate Certificate is still taxed on the amount above $50,000, at $15 for each $1,000 (or part thereof).

Whether you need a certificate at all depends partly on the institution holding the assets. Ontario says an estate normally must be probated if assets are held by a financial institution, and to confirm requirements with the institution. The institution sets its own approach, so ask each one what it requires.

What if the value turns out different from your estimate?

The applicant deposits an amount equal to the tax payable, using an estimate if the actual value is unknown. If the estimate was too high, part of the deposit is refunded. Where the deposit is based on an estimate, there is an undertaking to file a sworn statement of the actual value and pay any shortfall within six months.

If an estimated value was used, the return must be amended within 60 days after the actual value is shared with the court. If new assets are found later, the return is reported and amended within 60 days after the statement is delivered to the court. An estate that began under $50,000 can cross the line if a newly discovered asset pushes the value over it.

What to do next

• List assets and sort them into counted and excluded, using the joint ownership and beneficiary designation rules.
• Obtain date-of-death statements or appraisals.
• Subtract only mortgages and liens on real property, then compare the result with $50,000 and $150,000.
• Ask each bank or institution what it requires before releasing funds.
• Diary the 180-day deadline for the Estate Information Return from the date the certificate is issued.
• Speak with a lawyer or accountant if the value is close to a threshold or an asset's ownership is uncertain.

Frequently asked questions