Do Life Insurance and RRSPs Count for Estate Tax in Ontario?

If someone has died and left you life insurance or a registered plan, you may wonder whether those funds will be reduced by Ontario's probate tax. The answer depends mostly on who is named to receive the money.

This article explains how insurance, RRSPs, RRIFs and TFSAs are treated when the estate's value is worked out for Estate Administration Tax. It is general information, not advice on your situation.

How the tax works in brief

Ontario's Estate Administration Tax is charged only when an estate certificate (probate) is applied for and issued. If none 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 that, the tax is $15 for every $1,000 (or part thereof) of value over $50,000. So what counts toward the estate's value matters.

The estate's value is rounded up to the nearest thousand dollars to calculate the tax. The tax is paid as a deposit when the probate application is filed with the court, and once the certificate is issued the deposit becomes the Estate Administration Tax.

Life insurance, RRSPs, RRIFs, TFSAs and pension plans

Insurance paid to a named beneficiary is left out of the estate's value, because the deceased no longer owned that asset at death. Insurance is included only if the proceeds are payable to the estate.

If you are unsure who is named on a policy, ask the insurer or check the policy documents.

RPPs, RRSPs, RRIFs and TFSAs that have a beneficiary designation or declaration are left out of the estate's value. RRSPs, RRIFs and TFSAs whose beneficiary is the estate are included.

Other assets that are treated differently

• Jointly owned assets that pass automatically to the surviving owner are left out.
• CPP death benefits are left out.
• RDSPs are left out where the deceased was a subscriber but not a beneficiary.
• Real estate outside Ontario is left out.

Co-ownership can work differently depending on how the property is held. When a joint tenant dies, the surviving co-owners inherit the deceased's share. When a tenant in common dies, their 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.

Estate representatives must be able to support asset values with documents such as statements.

What else is counted, and what is deducted

Assets are valued at their fair market value at the time of death. The estate's value includes Ontario real estate at its appraised value on the date of death, less encumbrances such as mortgages or liens. It also includes bank accounts, investments, vehicles, business interests and other property wherever situated.

Only encumbrances on real property can be deducted. Funeral expenses, lawyer's fees, loans and interest, vehicle debt, credit card debt and real estate commissions do not reduce the estate's value. A mortgage, collateral mortgage or lien registered against real property that is part of the estate can be deducted from that property's value.

For complex assets, a professional appraiser with expertise in that area may help recommend a value.

The Estate Information Return after probate

The estate representative must file an Estate Information Return with the Ministry of Finance within 180 calendar days after the estate certificate is issued. If a filing deadline falls on a weekend or holiday, it moves to the next business day. Even when the estate is worth $50,000 or less and no tax is owed, the return must still be filed.

No return is required for succeeding estate trustee certificates or for litigation certificates.

• Filing online is recommended, and the return can also be filed by mail, courier, fax or in person.
• The records supporting the return must be kept for four years at the estate representative's principal place of business or residence.
• Within four years of the certificate being issued, an incorrect or incomplete return must be amended within 60 days of becoming aware of it.

What to do next

• Find the beneficiary designation for each policy and plan.
• Gather statements showing values at the date of death.
• Note any asset payable to the estate, since it counts toward value.
• Ask a lawyer or accountant to confirm how your situation is treated.

Whether the estate needs probate at all can depend on the facts, so it is worth confirming before you apply.

Frequently asked questions