Secondary Wills and Estate Administration Tax in Ontario

Some people leave more than one will, for example one covering private company shares and another covering everything else. As a trustee, you may ask whether that can reduce the value on which Estate Administration Tax is calculated.

This article explains what the tax rules say about a certificate limited to one will, how shares are valued, and why you should confirm the details before relying on this approach. It does not cover how wills are made.

The tax is based on the estate's value

The tax is charged only when an estate certificate is applied for and issued. For applications on or after January 1, 2020, no tax is payable on an estate worth $50,000 or less, and above that the tax is $15 for every $1,000 (or part thereof) over $50,000. The value is rounded up to the nearest thousand dollars.

Because the tax grows with value, the question of which assets are included in an application matters. The estate pays the tax, not the estate representative personally.

Before looking at multiple wills, it helps to know what generally counts toward the estate's value:

• Ontario real estate, at its appraised value on the date of death, less a mortgage or lien registered against that property.
• Bank accounts, investments, vehicles, business interests and other property wherever it is located.
• Insurance, but only if the proceeds are payable to the estate.
• RRSPs, RRIFs and TFSAs, but only where the estate is the beneficiary.

Some assets are left out. These include jointly owned assets that pass automatically to the surviving owners, insurance paid to a named beneficiary, and RRSPs, RRIFs, TFSAs and RPPs that have a beneficiary designation. Real estate outside Ontario and CPP death benefits are also left out. A tenant in common's share is different: it does not pass automatically and counts toward the estate's value if probate is sought.

What a limited certificate does

If the court issues a certificate limited to the assets in a specific will, only the assets in that will count toward the estate's value. That is the idea behind using more than one will. Whether it works for a particular estate depends on the wills and the facts, so it is worth confirming with a lawyer before relying on it.

How assets that are not covered by that certificate are dealt with also depends on your situation, and a lawyer can confirm it. Whether this changes the overall tax for an estate depends on the facts, so it is worth confirming with a lawyer. It affects which assets are counted for the certificate being sought.

Other kinds of certificate have their own rules. For resealing, ancillary and foreign nominee certificates, only assets located in Ontario are used to calculate the tax. No tax is payable on a Certificate of Appointment of Succeeding Estate Trustee, or on a Certificate of Appointment of Estate Trustee During Litigation.

Valuing private company shares

Assets are valued at their fair market value at the time of death. Estate representatives must be able to support the values with documents, such as statements or an appraiser's opinion of value. For complex assets, a professional appraiser with expertise in that area may help recommend a value.

Private company shares can be hard to value, because there is no market price to look up. Business interests are among the assets counted in the estate's value. Which valuation method suits a given company is a question for an appraiser or accountant.

Limits and cautions

Several things work against assuming this strategy will fit every estate.

• Debts do not reduce the value. Only encumbrances on real property can be deducted; loans, credit card debt, lawyer's fees and funeral expenses cannot.
• Whether the court will issue a limited certificate, and for which assets, depends on the wills and the circumstances. A lawyer can confirm this.
• Whether the assets in a will really belong to that will, and how the wills were drafted, affects the outcome.
• Understating value is risky. A trustee who files no return, or makes 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.

The Ministry of Finance may assess or reassess an estate's tax within four years after the day the tax was due. If a return was not filed on time or a misrepresentation was made, it may do so at any time.

What to do next

• Locate every will and note which assets each one covers.
• Get a date-of-death valuation of the company shares from a qualified appraiser or accountant, and keep the supporting documents.
• Ask a lawyer whether a certificate limited to a specific will is appropriate for this estate.
• Once a certificate is issued, file the Estate Information Return within 180 calendar days.
• Keep the supporting records for four years.

It also helps to understand how the money and filings work. The tax is paid as a deposit when the probate application is filed, and once the certificate is issued the deposit becomes the tax. The Estate Information Return is still required even when the estate is worth $50,000 or less and no tax is owed. Filing it online is recommended. If you later find new property, an amended return is due within 60 days after the statement of that property is delivered to the court. To dispute an assessment, a Notice of Objection must be filed within 180 days from the day the Notice of Assessment was issued.

Frequently asked questions