Estate Information Returns

What people refer to as probate fees is a tax more properly known as Estate Administration Tax.

In January 2015, pursuant to the provisions of the Estate Administration Tax Act, 1998 the Province of Ontario, pursuant to a regulation enabled under the original legislation, required all Estate Trustees/Executors thereafter appointed, to file information in the form of an Estate Information Return.

This was nothing new in a sense. Up until that point and for years, in fact, prior to the enactment of the Estate Administration Tax Act, Estate Trustees were required to report to the province on the value of the assets of the estate being submitted to probate. Up until January 1, 2015, however, the province only collected information on the whole amount of personalty (which is everything except real property) and the whole value of real estate reported to be part of the assets of the estate. The regulation required Estate Trustees for estates for which a Certificate of Appointment was issued after January 1, 2015, to provide detail on the nature of the assets being submitted for probate.

Our firm, and I believe others who practiced in the area of estate administration, prior to 2015, obtained information from our clients which was verified with statements, and as necessary letters of opinion or valuations, with regard to the value of the assets of the estate as we had to swear our clients’ affidavits on the veracity of that information. For us there was nothing really new as a result of the regulation except now the province got the same detail we had been collecting.

You would think that was relatively straightforward. Apparently not.

There was misinformation promulgated. One piece of that misinformation was that, all of a sudden the province was taking far more money in the form of Estate Administration Tax (popularly known as probate fees) than it had been previously. This was simply untrue. The calculation of Estate Administration Tax has not in fact changed for many years. .5% is charged on the first $50,000 of assets of the estate (the maximum is $250) and 1.5% on the balance. To give an example, on an estate whose assets are worth $100,000 as of the date of death the Estate Trustee would pay to the province ($250 + $750) = $1000 for probate fees. That had not changed.

Another piece of misinformation was how difficult it might be for a new Estate Trustee to prepare and file the Estate Administration Return. Since January 1, 2015 our firm, and no doubt others, have been gathering documentation from clients with regard to the nature and value of assets owned by the deceased as of the date of death. Most institutions will cooperate and provide a statement giving information as of that date or at least close to it. We have been obtaining letters of opinion from appraisers, which are relatively inexpensive to obtain, regarding the value of real property. Invariably we prepare a draft of the Estate Information Return which the client reviews when they sign the documentation for an Application to the court. The client can sign the Return after the Certificate is issued by the court and, in fact, must, by law, submit the Return to the Province within 90 days after the Certificate is issued by the Court. We have submitted a considerable number of these Returns to the province on behalf of clients since January 2015 and none of our clients, to date, has been audited. The gathering of this information and the preparation of the Return has not added substantially to the time spent by our firm on any Application as, previously, we were spending a similar amount of time gathering the same information -- we just were not preparing such Returns

As a result of the misinformation, however, which has arisen from this regulation, some people are attempting to avoid an application to the Court with sometimes dire results.

The most unfortunate circumstance I've seen was a situation where the deceased was the mother of three children, one of whom was disabled. The deceased had taken the time to prepare a will which included a special provision for the disabled child which is known as a discretionary trust or popularly as a Henson trust. As a result of advice taken by the deceased with regard to this new regulation she named all three of her children as beneficiaries on her RRIF and named all three children joint with herself on her investment account. When a disabled adult child owns more than $5000 worth of assets, disability payments from the Province (ODSP) stop until the capital is reduced to the $5000 amount of savings. We were able, in the circumstances, to take steps, by making the institution aware of the problems it had caused for the disabled person by providing the advice, to reverse those adverse effects. There were still some unfortunate tax consequences but the result for the disabled child might have been quite a bit more difficult had we not been able to effect that reversal.

Joint ownership to attempt to avoid the payment of Estate Administration Tax/probate fees can have other consequences. For instance if one child of three holds assets in joint ownership with a parent and the parent dies the following may be the consequences.

By virtue of a Supreme Court of Canada decision referred to as Pecore the child who held assets jointly with the parent, prior to the parent’s death held them on the basis of what is known as a resulting trust. Following the death of the parent the child , is still, at law, holding those assets pursuant to the trusts set forth in the will and expected to utilize those assets on behalf of all of the beneficiaries of the will and still has the same responsibilities as any Estate Trustee. They still have to provide statements to those beneficiaries and obtain releases. They still have a personal obligation with regard to tax and to creditors as they hold the assets they receive on trust and the trust is still contained within the will. Those children, however, do not always seek out the advice they need in order to perform their obligations properly. They may not realize, as they sometimes do not consult lawyers after the parent’s death, the nature of their obligations and the consequences if those obligations are not fulfilled.

 

Checklist for Information Required for Estate Administration Tax Act

The foregoing should not be considered to be legal advice and should not be relied upon as such. Please consult a lawyer to get advice and an opinion on your unique circumstances.