Executor Fees vs. Estate Administration Tax in Ontario

People often use "probate fees" and "executor fees" as if they were one cost. They are not. One is a tax paid to the Province of Ontario when a court certificate is applied for. The other is payment for the work of the person winding up the estate.

This article explains each charge, who pays it, how the tax is worked out, and how the two interact. It does not set an amount for executor compensation, because that depends on the circumstances, so it is worth confirming with a lawyer.

Two different charges for two different things

An executor winds up the deceased's affairs: paying taxes, bills and debts, collecting assets and distributing the rest. A named executor is not required to act. Whether and how much the executor is paid is a separate matter from the tax.

How the Estate Administration Tax is calculated

For a certificate applied for on or after January 1, 2020, there is no tax on the first $50,000 of estate value. Above that, the rate is $15 per $1,000 or part of $1,000. The estate value is rounded up to the nearest thousand before the tax is calculated. An estate of $240,000, for example, owes $2,850.

The estate pays the tax, not the executor personally. It is paid as a deposit when the certificate application is filed and becomes the tax once the certificate is issued. If no certificate is issued, no tax is owed and the deposit is refunded.

What counts toward the estate value

Estate value is the fair market value at the date of death of the assets the deceased owned. It includes Ontario real estate (less mortgages and liens), bank accounts, investments, vehicles, and RRSP, RRIF or TFSA assets with no beneficiary designation. It excludes jointly owned assets that pass to the survivor, real estate outside Ontario, and registered plans with a named beneficiary.

If the deceased left more than one will and the court issues a certificate limited to the assets in one will, only those assets count toward the tax base. Under a resealing or ancillary grant, only Ontario assets count.

How the two charges interact

The key point is that executor pay does not lower the tax. Funeral expenses, lawyer's fees, loans, credit card debt and real estate commissions cannot be deducted from the estate value for the tax, and only encumbrances on real property, such as a mortgage, are deductible. Executor compensation is therefore not deducted from the tax base.

How executor compensation is paid and how it affects what beneficiaries receive depends on your situation, so it is worth confirming with a lawyer. For tax purposes, executor fees not earned in the regular course of business are treated by CRA as office income for the executor, with CPP and income tax deducted and a T4A issued.

If the value must be estimated, the applicant swears the estimate, pays tax on it, and undertakes to file a sworn statement of total value within six months and pay any balance. If the estate cannot afford the tax at application, a judge can order payment later under s. 4(1) of the Estate Administration Tax Act, 1998.

Filing duties that follow the tax

An Estate Information Return is due within 180 calendar days after the certificate is issued, even if the estate is $50,000 or less. An amended return is due within 60 days of learning the first return was wrong or incomplete. Records must be kept for four years.

Failing to file, or making false or misleading statements, carries a fine of at least $1,000 and up to twice the tax payable, up to two years' imprisonment, or both.

What to do next

• List the deceased's assets and note which pass outside the estate, such as jointly held accounts or plans with a named beneficiary.
• Gather date-of-death values for what remains in the estate.
• Work out the tax using the rule above, rounding the value up to the nearest thousand.
• Agree on executor compensation in writing with the beneficiaries where possible.
• Diarize the 180-day deadline for the Estate Information Return once the certificate is issued.
• Ask a lawyer or accountant to confirm figures before filing.

Frequently asked questions