Small Estate Certificates in Ontario: Is Estate Administration Tax Still Owed?

If you are handling an Ontario estate that is modest in size, you may have heard that a simpler court process exists. It does, and it can make the paperwork lighter. A common worry is whether it also makes the probate tax disappear.

This article explains how Estate Administration Tax works when you use the small estate process, what you file and how you pay, and what still has to be done after the certificate is issued.

Does the small estate process remove the tax?

No. Since April 1, 2021, a small estate for probate purposes is one valued at $150,000 or less. Small estates still pay Estate Administration Tax on the value over $50,000, up to the $150,000 cap.

The tax is only charged when an estate certificate is applied for and issued. If no certificate is applied for or issued, no tax is owed. A Small Estate Certificate is an estate certificate, so the tax rules apply to it in the same way.

The tax is paid by the estate, not personally by the estate representative. In practice, that means it is a cost of the estate rather than something you cover from your own pocket.

How the tax is calculated

For certificates applied for on or after January 1, 2020, no tax is payable on an estate worth $50,000 or less. Above $50,000, the tax is $15 for every $1,000 (or part thereof) of the estate's value over $50,000. The estate's value is rounded up to the nearest thousand dollars before you calculate.

So the steps are: work out the estate's value, round it up to the next thousand, subtract $50,000, and apply the rate to each $1,000 of what remains. A lawyer or accountant can confirm your figure before you file.

What counts toward the value matters. Examples of what is generally included or left out:

• Included: Ontario real estate at its appraised value on the date of death, less mortgages or liens registered against it.
• Included: bank accounts, investments, vehicles and business interests, and insurance or registered plans where the estate is the beneficiary.
• Left out: insurance paid to a named beneficiary, and jointly owned assets that pass automatically to the surviving owner.
• Left out: registered plans with a beneficiary designation, and real estate outside Ontario.
• Not deductible: funeral expenses, lawyer's fees, credit card debt and similar debts, because only encumbrances on real property reduce the value.

Assets are valued at fair market value at the time of death, and you should be able to support your figures with documents such as statements or an appraiser's opinion.

The forms and how to pay

The small estate application is Form 74.1A, filed with Form 74.1B, together with a draft Small Estate Certificate (Form 74.1C).

The tax is paid when the application is filed, unless it is not payable or the court orders it deferred. Whether deferral could apply to you is a question for a lawyer.

At the court office, the tax can be paid by:

• cash or debit (where available)
• a certified cheque
• a cheque from a solicitor or firm trust account
• a cheque from a trust company account
• a bank draft

Cheques and drafts are made payable to "Minister of Finance".

The Estate Information Return is still required

An Estate Information Return must be filed within 180 calendar days of receiving a Small Estate Certificate, even if the estate is under $50,000 and no tax is owed. It is filed with the Ministry of Finance.

If the deadline falls on a weekend or holiday, it moves to the next business day. Filing online is recommended, though mail, courier, fax or in person are also options.

Keep the records that support the return for four years at your principal place of business or residence. Failing to file, or making false or misleading statements, can lead to a fine of at least $1,000 and up to twice the tax payable, imprisonment for up to two years, or both.

If you later learn the return is incorrect or incomplete, an amended return must be filed within 60 days of becoming aware of it, and this duty applies within four years of the certificate being issued.

What if new assets turn up?

If assets are found after the certificate is issued, the answer depends on the new total. If it is still $150,000 or less, the estate can apply for an Amended Small Estate Certificate (Form 74.1E). If the total goes over $150,000, a Certificate of Appointment of Estate Trustee must be applied for instead.

An amended Estate Information Return listing the newly discovered property is due within 60 days after the statement of that property is delivered to the court. Additional tax found to be owing can be paid to the Superior Court of Justice or the Ministry of Finance, with an affidavit setting out the revised value of the estate at the time of death.

What to do next

• List the deceased's assets and confirm the total is $150,000 or less.
• Gather statements, appraisals and mortgage details to support each value.
• Round the total up to the nearest thousand and work out the tax on the amount over $50,000.
• Prepare Forms 74.1A and 74.1B and the draft certificate, Form 74.1C.
• Arrange payment in an accepted form, payable to "Minister of Finance".
• Diarize the 180-day return deadline as soon as the certificate is issued.

If the estate is close to the limit, includes jointly held or foreign property, or you are unsure what counts, a lawyer or accountant can help you confirm the value before you file.

Frequently asked questions