Understanding Estate Administration Tax in Ontario
What are probate fees and what are the exceptions to probate?
Estate Administration Tax (EAT), also referred to as probate fees, is the tax applicable on the total value of the estate of a deceased person. When an estate is subject to probate or a Certificate of Appointment of Estate Trustee needs to be applied for, the estate will have to pay estate administration tax on the total value of the estate to the Minister of Finance either at the time of making the application or at a later time by getting an extension from the courts. This total value is based on date of death values for assets, net of mortgage and other liens against real estate.
What are the exceptions to Estate Administration Tax?
There are, of course, exceptions where EAT is not payable. These include situations where the following types of Certificate of Appointments are being applied for:
- A Certificate of Appointment of Estate Trustee during litigation;
- A Certificate of Appointment of Succeeding Estate Trustee with or without a Will; and
- A Certificate of Appointment of Succeeding Estate Trustee limited to assets referred to in the Will
In other estate planning situations, your lawyer can advise whether or not the EAT would be payable or if an exception applies.
How do you calculate Estate Administration Tax?
As of January 1, 2020, the first $50,000.00 of the value of the estate is not subject to Estate Administration Tax. The calculation on the value exceeding $50,000.00 is as follows:
- $0 per $1,000 for the first $50,000.00 of the estate (since the first $50,000.00 is exempt)
- $15 per $1,000 for the remaining value that exceeds $50,000.00
The value is rounded up to the nearest thousand when doing this calculation.
For example, if the estate is valued at $349,150.00, the tax would be calculated on $350,000.00 as follows:
$350,000 minus $50,000 = $300,000
$300,000 / $1,000 = $3000
$3,000 / $15 = $4,500.00
Estate administration tax payable would be $4,500.00
As another example, if the estate value is $45,000.00, no Estate Administration Tax would be payable due to the changes applicable as of January 1, 2020.
How do I avoid paying Estate Administration Tax?
With proper estate planning, you can often minimize the estate administration tax and have more available for your beneficiaries.
Contact Apeksha Jain (firstname.lastname@example.org) to assist with your estate administration and planning needs.