- Estate administration tax is calculated on the value of the estate, and the rate above the exemption is $15 for each $1,000 or part of $1,000.
- What is counted in that value, and what can be deducted, follows specific rules.
- Whether a second will makes sense depends on the assets and how they are held, so it is worth confirming with a lawyer before relying on the idea.
You may have heard that some people use two wills, often called a primary will and a secondary will, to lower the tax paid when an estate goes through probate. If you are an executor or a beneficiary, you probably want to know how the idea works and whether it applies to the estate in front of you.
This article explains the tax that the idea is aimed at and how the value of an estate is worked out. It also explains why the answer depends on the facts. It is general information about Ontario, not advice on a particular estate.
What primary and secondary wills mean
In plain words, a person using this approach signs more than one will. Each will deals with a different group of assets. The primary will usually covers the assets that need a court certificate to be dealt with. The secondary will covers assets that may not need one.
The goal is to put fewer assets in front of the court, so that a smaller value is used to calculate the tax. Whether that goal can be met depends on the type of asset, how it is owned and what an institution will accept. A lawyer who reviews the actual wills and assets can tell you whether it works in your case.
The tax the idea is aimed at
For applications made on or after January 1, 2020, no estate administration tax is payable if the estate is worth $50,000 or less. Above that, the tax is $15 for each $1,000 or part of $1,000 by which the value exceeds $50,000. The estate value is rounded up to the nearest thousand.
The tax is paid as a deposit when the application is filed. It becomes payable when the certificate is issued, and the estate pays it, not the estate representative personally. For applications made before January 1, 2020, the exemption was $1,000 or less and different rates applied.
How the value of the estate is worked out
These rules apply whether there is one will or several. They decide what goes into the number the tax is based on.
- Real estate outside Ontario is not included in the value for this tax. Other property worldwide is included, such as bank accounts (including foreign banks), investments, vehicles and business interests.
- Ontario real estate is valued less its encumbrances, such as a mortgage, collateral mortgage or lien.
- Unsecured debts such as credit card balances, loans, interest and lines of credit cannot be deducted to reduce the value.
- Assets, including private company shares and business interests, are valued at fair market value at the date of death. You should be able to support each value with documents such as statements or an appraiser's opinion.
Why the answer depends on the facts
Ontario guidance says that if the deceased owned real property or assets held by a financial institution, the estate normally has to be probated. It also advises checking whether the institution requires a certificate of appointment or a small estate certificate. Some assets do not need a certificate at all. Assets held jointly or with a designated beneficiary, such as an insurance policy or joint bank account, pass according to how they are owned or designated.
Because of this, the first step is to sort the assets into those that will need a certificate and those that will not. A second will is only one possible tool, and it is not suitable for every estate.
Accuracy matters. An Estate Information Return must be filed with the Ministry of Finance within 180 calendar days after the certificate is issued, even if no tax is payable. Failing to file the required information, or making false or misleading statements, is an offence. It is not an offence if the person did not know, and could not reasonably have known, that a statement was false.
What to do next
- Find every will the person signed and confirm which one is the most recent.
- List each asset, how it was held, and whether a named beneficiary or joint owner is on it.
- Ask each bank or other institution what document it needs to release the asset.
- Gather statements or appraisals that support the value of each asset at the date of death.
- Speak with a lawyer or accountant before filing if more than one will exists, or before relying on a second will to reduce the tax.
Frequently asked questions
Do two wills automatically reduce probate tax in Ontario?
No. The tax is based on the value of the estate as the rules define it, and that depends on which assets are included. Whether a second will changes that value depends on the assets and how they are held, so a lawyer should review the documents.
Is there tax on a small estate in Ontario?
For applications made on or after January 1, 2020, no tax is payable if the estate is worth $50,000 or less. Above that amount the tax is $15 for each $1,000 or part of $1,000 over $50,000.
Can I deduct credit card debt from the estate value?
No. Unsecured debts such as credit card balances, loans and lines of credit cannot be deducted to reduce the value for estate administration tax. A mortgage or lien on Ontario real estate is treated differently and reduces the value of that property.
Do I still have to file a return if no tax is payable?
Yes. The Estate Information Return must be filed within 180 calendar days after the certificate is issued, even if no tax is payable.
Sources
- Ontario.ca – Estate Administration Tax — ontario.ca
- Estate Administration Tax Act, 1998, s. 5.1 — Ontario e-Laws
- Ontario.ca – Administering estates — ontario.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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