Newer Rules for Probate Fees (Estate Administration Tax)

Background
In the late 1990’s the Ontario government increased probate fees from a fixed nominal fee to a percentage of the value of the estate. Probate fees were set at 0.5% of the value of the estate up to $50,000 ($250) and 1.5% for all assets above $50k (eg. $15k on an estate of $1m). A media frenzy ensued and suggested manoeuvers to avoid probate fees in various ways such as transferring properties and bank accounts into joint tenancy or the creation of multiple Wills. Unfortunately some of these poor attempts to avoid a minimal probate fee resulted in more serious (income) tax problems and family disputes.
The New Rules
As of January 1, 2015, the Ontario government introduced significant revisions to try to fix these problems (and of course increase their revenues).
• Probate fees are no longer required to be submitted with the probate application.
• Once probate is granted the estate trustee has 90 days to submit the probate fees along with a sworn “tax return” setting out the total value of all assets as of the date of death.
The estate trustee must now:
• Maintain the information supporting the value declared on the “tax return” and an auditing system will be in place shortly for verifying the submitted values. Estate trustees are liable personally for additional probate fees owing and may be subject to fines for non-disclosure (even after final administration and distribution of the estate).
• Disclose assets which do not require probate to administer, such as cash and cash on deposit at a Canadian or foreign bank (eg. cash held in a shoe box in a closet or a safety deposit box).
• Report and pay additional probate fees if values are later found to be higher than originally submitted or new assets are found.
The consequences to estate trustees for breaching the continuing obligation or swearing a false statement and/or not disclosing all assets of the deceased include imprisonment for up to 2 years and/or a fine of double the amount of the probate fees payable.
Conclusion
Presently, probate fees are not terribly onerous and legal structures are available to avoid or minimize the amount payable. However, attempts to reduce probate fees must be measured and appropriate in the context of each estate plan and should only be done with the assistance of a lawyer skilled in estate planning to avoid triggering family disputes or tax problems. It is also possible that probate fees will increase in the future (and may ultimately resemble an estate tax).
There are serious liabilities on estate trustees already and the recent changes have added more. This confirms the need for good legal counsel to provide advice and guidance throughout the administration process.
Note – I have used the expression “probate” because most people understand this now outdated expression. The current term for “probate” is “estate administration” and a “probate fee” is “estate administration tax” and “probate certificate” is a “certificate of appointment of estate trustee”.

Prepared by:
Ismail Barmania
Barmania-Lawyers
(416-777-4016)

Compliments of:
Albert Brandstatter
Investment Advisor, Senior VP
National Bank Financial
Office : 905-272-3501
albert.brandstatter@nbc.ca

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