Can the Ministry of Finance Audit Your Estate Value After Probate?

If you are an executor who worries you may have undervalued a house, an account or an investment, you are not alone. After probate is granted, the question becomes what the government can do about it and for how long.

This article explains how the Ministry of Finance can reassess an estate's tax, the time limits, what happens when tax was underpaid, and what to do if you spot a mistake. It is general information, and a lawyer or accountant can look at the details of your estate.

How the tax is set in the first place

For applications made on or after January 1, 2020, estate administration tax is $15 for every $1,000 of estate value, or part of $1,000, with the first $50,000 exempt. You pay it as a deposit when you apply, and it becomes the tax once the certificate is issued.

The tax rests on the value you report, so the Ministry's attention naturally falls on that figure. After the certificate, you must file the Estate Information Return within 180 calendar days.

Reassessment: the Ministry's power and its time limits

The Ministry of Finance may reassess an estate's tax within four years after the tax was due, which is the day the certificate is issued. In practice the power is framed as assessment and reassessment of the tax rather than an audit in the ordinary sense.

The four-year limit does not apply in every case. The Ministry may assess or reassess at any time if a required filing was missed or there was misrepresentation or fraud. If you disagree with a Notice of Assessment, you must file a Notice of Objection within 180 days of that notice.

What can go wrong with a valuation

Most disputes come from what was counted or left out. The estate value includes Ontario real estate less encumbrances, bank accounts including foreign banks, investments, RRSPs, RRIFs and TFSAs without a beneficiary designation, vehicles and vessels wherever located, property held in another person's name and insurance proceeds payable to the estate.

• Deducting items that cannot be deducted, such as funeral costs, lawyer's fees, credit card debt or real estate commissions.
• Leaving out a foreign bank account or a vehicle, which are still counted.
• Treating an asset as excluded when it did not actually have a named beneficiary or joint owner.
• Using an estimate and not following up with the sworn statement of actual value.

Ontario's guidance does not say a formal appraisal is mandatory. It describes a sworn, date-of-death value. A well-documented, honest valuation is your best protection, even though no outcome can be promised.

If tax was underpaid or you find a mistake

If information was wrong or incomplete, you need to file an amended Estate Information Return within 60 days of becoming aware of the problem, and within four years of the certificate being issued. New assets call for an amended return within 60 days after the statement is delivered to the court. Where an estimated value was used, the amended return is due within 60 days of the actual value being shared with the court.

Penalties are separate from the tax. A representative who fails to file, or who files false or misleading statements, may be fined at least $1,000 and up to twice the tax payable, imprisoned for up to two years, or both. Correcting an honest mistake promptly is generally far better than waiting to be found out, and a lawyer can help you with how to do it.

If you overpaid instead

Overpaid tax is recovered by making a request to the Ministry of Finance. The return must have been filed within four years of the certificate issuing, and the request must be made within 12 years of issuance or two years of a Notice of Assessment. A deposit paid on application can be refunded by the Superior Court only if the certificate has not been issued.

What to do next

• Find the date the certificate was issued and note four years from that date.
• Compare your return with your records for each asset and debt.
• Check whether any estimate was followed by a sworn statement of actual value.
• If something is off, act on the 60-day amended return deadline right away.
• Keep valuation records, mortgage statements and account statements with the estate file.
• Speak to a lawyer or accountant before distributing the estate, and consider a CRA clearance certificate, since an executor who distributes without one can be liable for unpaid income tax up to the value distributed.

Frequently asked questions