How to Avoid Probate Fees in Ontario Legally

Probate fees in Ontario are really a tax on the value of the estate, called the Estate Administration Tax. If you own a home, the number can be large enough that people look for lawful ways to reduce it.

This article explains how the tax is calculated, which assets are not counted, and the risks that come with joint ownership and beneficiary designations. It does not cover drafting a will. Because the right approach depends on your family and your assets, a lawyer should review any plan before you act.

How much the tax is

For certificates applied for on or after January 1, 2020, there is no tax on the first $50,000 of the estate's value. Above that, the tax is $15 for every $1,000, or part of $1,000. That is 1.5%.

The estate value is rounded up to the nearest $1,000. For a $240,000 estate, the tax is $2,850, and a $500,000 estate pays $6,750. The estate pays the tax, not the estate representative personally.

Probate is not always needed

An estate normally must be probated if the deceased owned real property, or assets held by a financial institution, in their own name. The type of assets usually decides whether it is needed. So the planning question is usually which assets will be in the deceased's name alone at death.

Estates of $150,000 or less can use the simplified Small Estate Certificate process. Estates over $50,000 and up to $150,000 still pay the tax when the application is filed.

Lawful ways assets stay outside the tax base

• Joint ownership with survivorship. Assets held jointly that automatically become the property of the other owner(s) on death are not included in the estate value for the tax.
• Named beneficiaries on registered plans. Registered Pension Plans, RRSPs, RRIFs and TFSAs with a beneficiary designation or beneficiary declaration are not included. If there is no such designation, they are included.
• Real estate outside Ontario. It is not included in the estate value for Ontario Estate Administration Tax.
• Assets given away before death. Assets the deceased no longer owned at the time of death are not included.

A surviving joint tenant takes land by survivorship through a survivorship application under Land Titles Act s. 123, and no estate certificate is needed.

The risks to weigh before you change anything

Saving tax is only one factor. Each of these strategies changes who owns what, and some of the consequences are not about money.

Joint accounts with an adult child are a common problem. When a parent puts money into a joint account with an adult child without payment, the law presumes the child holds it in trust for the parent's estate. That presumption can be rebutted by evidence, on a balance of probabilities, that the parent intended the child to have the right of survivorship. For gratuitous transfers to a minor child, the starting point is instead the presumption of advancement, meaning a gift. If intentions are unclear, the account may end up in a dispute or back inside the estate.

It is worth reviewing your beneficiary designations from time to time to make sure they still match what you want. If there is no designation, the registered plan is included in the estate value. Other general concerns, which depend on the facts, include losing control of an asset, exposing it to a co-owner's creditors, and leaving other family members out of the picture. A lawyer can explain how these apply to you.

Income tax is a separate matter. A deceased person is considered to have sold all their capital property just before death, which can create a capital gain on the final return. Property left to a surviving spouse or common-law partner who lived in Canada can generally roll over tax-deferred, but the legal representative can elect not to use the rollover.

What to do next

Reduce the tax only with accurate information. A representative who fails to file the Estate Information Return, or who makes false or misleading statements, may be fined at least $1,000 and up to twice the tax payable, and may also face up to two years' imprisonment. The Ministry of Finance may reassess at any time if a return was not filed or if there was misrepresentation or fraud.

• List your assets and how each is held: your name alone, jointly, or with a named beneficiary.
• Check whether each registered plan has a current beneficiary designation.
• Think about why each joint account exists and whether everyone understands the intention.
• Estimate the tax using the $15 per $1,000 rate above $50,000.
• Speak with a lawyer, and an accountant for income tax questions, before retitling any asset.

Frequently asked questions