Money Owed to You at Death: How Loans Receivable Affect Ontario's Estate Administration Tax

If someone owed the deceased money when they died — a personal loan to a sibling, an unpaid promissory note, money advanced to a struggling business — that debt does not simply vanish. It becomes an asset of the estate, and in Ontario, it generally has to be identified, valued, and included when the executor calculates Estate Administration Tax.

This surprises a lot of families, especially where the loan was informal: a handwritten note, a verbal understanding between relatives, or an e-transfer with no paperwork behind it at all. Whether or not there was ever a signed agreement, a genuine debt that was still outstanding on the date of death is, legally, money the estate is owed.

This article walks through how loans receivable are treated for Ontario estate purposes, how executors are expected to value them, and what to do when the paperwork is thin or the debtor disputes the debt.

What Counts as "Money Owed to the Deceased"

A few common examples of loans receivable that estates run into:

• A personal loan to an adult child, sibling, or friend, whether or not it was ever written down
• A promissory note or private loan agreement
• Money advanced to a business the deceased partly owned, or to a business partner personally
• A private mortgage or vendor take-back the deceased held on a property they sold
• Unpaid invoices from a business or professional practice the deceased operated

The key distinction is between a loan and a gift. A loan carries an expectation of repayment; a gift does not. If the money was clearly intended as a gift when it was given, it is not an estate asset. If it was intended as a loan — even an informal one between family members — it generally is, unless it was properly forgiven before death.

Why an Unpaid Loan Belongs in the Estate Administration Tax Calculation

Estate Administration Tax is calculated on the value of the assets that pass through the estate and require a Certificate of Appointment of Estate Trustee. As of mid-2026 figures — verify the current amount before relying on it — there is no tax on the first $50,000 of estate value, and the tax is $15 per $1,000 (1.5%) on the value above that, with the estate's value rounded up to the nearest $1,000.

A loan receivable, once it is properly valued, is added to the total the same way a bank account, investment, or piece of property would be. Leaving it out because it feels awkward to collect from a family member, or because there is no paper trail, does not remove the underlying legal obligation to report it accurately.

Valuing an Outstanding Loan as of the Date of Death

The general principle is that a loan receivable is valued at what it was genuinely worth on the date of death — typically the outstanding principal, plus any interest that had accrued under the loan's actual terms, if it carried one.

Where there were no formal terms — no interest rate, no repayment schedule — the value is usually just the amount that was advanced and has not yet been repaid. Where there is a real, documented reason to doubt the debt is fully collectible (the debtor is insolvent, disputes owing the money, or has disappeared), that uncertainty can affect the value the estate reasonably assigns to it — but this is not a decision to make informally, and it should be discussed with the estate's lawyer or accountant rather than simply estimated.

When the Paperwork Is Thin: Informal Family Loans

Many family loans were never formalized. If you are administering an estate and suspect money is owed but there is no promissory note, start by gathering whatever evidence does exist:

• Bank or e-transfer records showing the funds leaving the deceased's account
• Text messages, emails, or letters referencing the loan or repayment
• Any partial repayments already made
• Notes in the deceased's own records, calendars, or files

If the will itself forgives a specific loan, or there is credible evidence the deceased intended to forgive it before death, that changes its character — a properly forgiven debt is no longer an estate asset as of the date it was forgiven. Where the facts are genuinely unclear, this is exactly the kind of judgment call an estate trustee should not make alone.

Documenting the Loan for the Estate Information Return

Executors must file an Estate Information Return with the Ontario Ministry of Finance, and should be prepared to support every asset value on it, including loans receivable. A useful documentation checklist:

• [ ] Any written loan agreement or promissory note
• [ ] Bank or transfer records showing the funds were advanced
• [ ] Records of any partial repayments made before death
• [ ] Correspondence acknowledging the debt exists
• [ ] Details of any interest rate or repayment terms
• [ ] The debtor's contact information and any communication about repayment since death

If the Debtor Disputes the Debt or Refuses to Pay

As a fiduciary, an estate trustee generally has a duty to pursue estate assets, including collecting genuine debts — but that duty is not unlimited. Where the cost and difficulty of collection clearly outweighs what could realistically be recovered, that is a legitimate factor in deciding how to proceed, ideally with legal advice on the record.

Keep in mind that Ontario's basic limitation period for pursuing most civil claims is two years from when the claim was discovered, so a debt an estate intends to enforce should not simply be left sitting. If a loan later proves genuinely uncollectible, that should be documented clearly before the estate's final value is settled.

Frequently asked questions