How to Calculate Ontario Estate Administration Tax: Worked Examples

If you are the executor, the Estate Administration Tax is usually the first number you need before you can apply for probate. It is paid as a deposit when the application is filed, so you need a reasonable estimate of the estate's value up front.

This guide walks through the formula, what counts toward the estate's value, what can and cannot be deducted, and three worked examples. The examples are illustrations only. Your own estate may have features that change the result, so confirm anything unusual with a lawyer or accountant.

The formula for applications on or after January 1, 2020

The tax applies only when an estate certificate (probate) is applied for and issued. If no certificate is applied for or issued, no tax is owed. 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. Above $50,000, the tax is $15 for every $1,000 (or part of $1,000) of the estate's value over $50,000. Before you apply the rate, the estate's value is rounded up to the nearest thousand dollars.

• First, add up the value of the assets that count toward the estate.
• Next, subtract mortgages and liens registered against real property in the estate.
• Then round the result up to the nearest thousand dollars.
• Then subtract $50,000, because no tax is payable on the first $50,000.
• Finally, multiply the remaining thousands by $15.

What counts toward the estate's value

Assets are valued at their fair market value at the time of death. Ontario real estate is valued at its appraised value on the date of death, less encumbrances such as mortgages or liens. That date-of-death appraisal is used even if the property sells for more or less shortly afterward.

Also included are bank accounts (including at foreign banks), investments, vehicles and vessels wherever located, property held in another person's name, business interests and other property wherever situated. Insurance counts if the proceeds are payable to the estate. RRSPs, RRIFs and TFSAs count where the estate is the beneficiary.

Some things are left out. Assets the deceased no longer owned at death, such as insurance paid to a named beneficiary, are excluded. So are jointly owned assets that pass automatically to the surviving owner. Registered plans with a beneficiary designation or declaration are left out. Real estate outside Ontario, CPP death benefits, and RDSPs where the deceased was a subscriber but not a beneficiary are also excluded. A tenant in common's share is different: it becomes part of the estate and counts if probate is sought.

Keep supporting documents, such as statements or an appraiser's opinion of value, to back up your figures. For complex assets, a professional appraiser with the right background may help recommend a value.

What you can and cannot deduct

Only encumbrances on real property can be deducted. A mortgage, collateral mortgage or lien registered against real property that is part of the estate reduces that property's value.

Many costs that feel like estate debts do not reduce the value for tax purposes. These are funeral expenses, lawyer's fees, loans and interest, vehicle debt, credit card debt, real estate commissions, and unregistered loans and lines of credit.

On Form 74A, you report the total value of real property, the total value of personal property, and the total estate value. Keeping real and personal property in separate columns of your own worksheet makes that form easier to complete.

Three worked examples

Example A: a modest estate. If the estate is worth $50,000 or less, no tax is payable. The estate must still file an Estate Information Return after the certificate is issued.

Example B: a small estate. A small estate for probate purposes is one valued at $150,000 or less. Tax is still payable on the value over $50,000, up to the $150,000 cap. Within that range, the rate is $15 for every $1,000 or part of $1,000.

Example C: a house with a mortgage. Start with the house's appraised value on the date of death and subtract the registered mortgage to get its net value. Add the other assets that count, such as bank accounts. Round the total up to the nearest thousand dollars, subtract $50,000, and apply $15 for every $1,000 or part of $1,000 left. If the deceased also owed money on credit cards, that debt does not reduce the figure.

Older applications and how to pay

If the application was made before January 1, 2020, the old rates apply: $5 per $1,000 (or part) on the first $50,000 and $15 per $1,000 on the amount above $50,000. Estates of $1,000 or less were exempt. For applications made on or after that date, use the current formula described above.

At the court office, the tax can be paid by cash or debit (where available), certified cheque, a cheque from a solicitor or firm trust account, a cheque from a trust company account, or a bank draft. Cheques and drafts are made payable to "Minister of Finance". Once the certificate is issued, the deposit becomes the Estate Administration Tax.

What to do next

• List every asset and its fair market value at the date of death, and keep statements or appraisals.
• Separate assets that pass outside the estate, such as joint accounts with survivorship or named-beneficiary insurance.
• Confirm the registered mortgages and liens on any Ontario real estate.
• Complete the value fields on Form 74A and prepare the deposit in an accepted payment form.
• Diarize the Estate Information Return, due within 180 calendar days after the certificate is issued.

If you used an estimate, or later find the return was wrong or assets turn up, amended returns have deadlines of 60 days. Because penalties for failing to file or for false or misleading statements can be serious, it is worth having a lawyer or accountant review the numbers if the estate is large or complicated.

Frequently asked questions