Getting a Refund of Estate Administration Tax in Ontario

Paying Estate Administration Tax can feel like a one-way street. But sometimes an estate pays more than it should, or an application is withdrawn after money has already gone in. If you are the estate trustee, it helps to know that a refund may be possible. Where you ask depends on whether a certificate was ever issued, and a refund of tax already paid also depends on an Estate Information Return filed within four years of the certificate and on the 12-year and two-year request limits.

This article explains the difference between the deposit paid at filing and the tax itself, who you ask for each kind of refund, the conditions and time limits, and the mistakes that most often lead to overpayment. Every estate is different, so a lawyer or accountant can confirm how this applies to yours.

Deposit or tax: why the difference matters

The tax is paid as a deposit when the probate application is filed with the court. Once the probate certificate is issued, that deposit becomes the Estate Administration Tax. The tax is charged only when an estate certificate is applied for and issued, so if no certificate is issued, no tax is owed.

That is why the stage you are at decides everything. Before a certificate is issued you are dealing with a deposit. After it is issued you are dealing with tax that has already been paid. The estate pays the tax, not you personally as the estate representative.

Who you ask for the refund

A deposit refund is available only if no certificate has been issued. If a certificate has been issued, the courthouse is not the place to ask. The request goes to the Ministry of Finance instead.

Conditions and time limits for a tax refund

A refund of tax already paid requires that an Estate Information Return was filed within four years of the certificate. The request itself must be made within 12 years of issuance or within two years of a Notice of Assessment.

The return is due within 180 calendar days after the certificate is issued. If that deadline falls on a weekend or holiday, it moves to the next business day. Filing online is recommended, though mail, courier, fax and in-person filing are also possible. Even where the estate is worth $50,000 or less and no tax is owed, the return must still be filed.

If the Ministry reassesses the estate and you disagree, a Notice of Objection must be filed within 180 days from the day the Notice of Assessment was issued.

How an overpayment can happen

For certificates applied for on or after January 1, 2020, there is no tax on an estate worth $50,000 or less. Above that, the tax is $15 for every $1,000 (or part of $1,000) over $50,000, and the estate's value is rounded up to the nearest thousand dollars. Because each $1,000 costs $15, an error in value can add up. Common causes include:

• Assets valued incorrectly. Assets are valued at fair market value at the time of death, and real property at its appraised value on the date of death.
• A mortgage on Ontario real property not deducted. A mortgage, collateral mortgage or lien registered against real property in the estate can be deducted from that property's value.
• Assets with a named beneficiary counted by mistake, such as insurance paid to a named beneficiary.
• Jointly owned assets that pass automatically to the surviving owner counted by mistake.
• RRSPs, RRIFs, TFSAs or RPPs with a beneficiary designation counted by mistake.
• Real estate outside Ontario counted, even though it is left out of the estate's value.

Be careful in the other direction too. Only encumbrances on real property can be deducted. Funeral expenses, lawyer's fees, loans, credit card debt and real estate commissions do not reduce the value. And a tenant in common's share does not pass automatically to the other owners: it becomes part of their estate, so it counts toward the estate's value if probate is sought.

Correcting the return and keeping records

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. This duty applies within four years of the certificate being issued. Where an estimated value was used on the application, an amended return is due within 60 days after the actual value is given to the court.

Estate representatives must be able to back up asset values with documents such as statements or an appraiser's opinion of value. The records supporting the return must be kept for four years at the representative's principal place of business or residence.

Keep in mind that a correction can go either way. The Ministry may assess or reassess within four years after the tax was due. If a return was late or a misrepresentation was made, there is no four-year limit. A failure to file, or false or misleading statements, can lead to a fine of at least $1,000 and up to twice the tax payable, imprisonment of up to two years, or both.

What to do next

• Confirm whether a certificate was ever issued. This decides whether you deal with the court or the Ministry of Finance.
• Gather the date of the certificate, any Notice of Assessment, and a copy of the filed Estate Information Return.
• Compare the values reported with date-of-death statements, appraisals and registered mortgage details.
• Check for assets that should have been left out, such as joint assets, named-beneficiary assets and Ontario-excluded real estate.
• If you learn information in a filed return was wrong, an amended return is generally due within 60 days of becoming aware of it, within four years of the certificate being issued.
• Note the four-year, 12-year and two-year time limits and diarize them.
• Speak with a lawyer or accountant if the numbers are large or the facts are unclear.

Frequently asked questions