Estate Administration Tax (“EAT”) formally known as probate fees, is a tax charged on the total value of the deceased’s estate and is paid to the government of Ontario at the time that an estate is submitted for a certificate of appointment of estate trustee or more commonly referred to as probate.

Understanding the EAT is a vital component of estate planning.

Who applies?

The applicant is the executor of the deceased’s estate. When acting as a prospective estate trustee in Ontario, it is often necessary to apply to the court for a certificate of appointment of estate trustee. The Certificate of Appointment is a process where the court reviews the Will and gives the court’s stamp of approval as to the authenticity of the Will and verifies your right to act as Estate Trustee. This process is also often required if there is no Will so that the court can authorize an Estate Trustee to act for the Estate.

Who pays?

The estate tax is not paid from the estate representatives, but rather, from the accounts of the estate.

How is it calculated?

As of Jan. 1, 2020, the estate tax is calculated as follows:

  • The first $50,000 of the estate or less is exempt from estate tax;
  • Value exceeding $50,000: $15 per $1,000 (or any part thereof) for the estate value exceeding $50,000.
  • Valuation of assets should be determined on the fair market value of the assets at the time of death. Estate representatives must be able to prove the value of assets through supporting documents (i.e., a statement of appraisal, financial statements, etc.). This can get quite complicated and may require the professional services of an appraiser.

How is it paid?

The estate tax is paid in the form of a deposit and is calculated based on the value of the assets of the estate on the date of death. The value of the estate is all the property that belonged to the deceased person at the time of their death as explained below. Practitioners can also refer to s. 1 of the Estate Administration Tax Act.

The following assets are included in the calculation of the estate tax:

  • Real estate in Ontario, less the actual value of any encumbrance on real property (for example, mortgages and/or liens). The value used in this calculation is the appraised value at the date of death;
  • Bank accounts (including foreign accounts);
  • Single-owned investments accounts (such as stocks, bonds, mutual funds, TFSAs, RRSPs);
  • All property of the deceased held in another person’s name;
  • Vehicles and vessels;
  • All other property including goods, intangible property, business interests; and, insurance if proceeds are left to the estate.

It excludes:

  • Assets passing on survivorship (i.e. joint accounts, property owned as joint tenants)
  • Real estate owned outside Ontario;
  • CPP death benefits
  • Insurance proceeds or registered funds passing to a named beneficiary or assigned for value; and
  • Debts owing by deceased, including credit card debts, car loans, etc.

If you’re thinking about your estate plan but don’t know where to get started, contact our office for a free consultation!

The information and comments herein are for the general information of the reader and are not intended as advice or opinion to be relied upon in relation to any particular circumstances. For particular application of the law to specific situations, the reader should seek professional advice.