The New Estate Information Return will have an impact on estate taxes when probating a will.
Probate is a court document that legally authorizes an executor to administer the provisions of a will. In Ontario an executor is called an Estate Trustee with a Will or Estate Trustee without a Will.
If probate is needed, the representative of the estate files a Certificate of Appointment for Estate Trustee with the Court. A Lawyer schooled on wills and estates can best decide whether probate can be avoided based on the type and nature of the assets of an estate.
Probate Triggers Estate Fees
A Court Certificate of Appointment triggers Estate Administration Tax, also known as probate fees. Until December 31, 2014 the tax was based on the Trustee’s estimate of the value of the assets. As of January 1, 2015 The Ministry of Finance requires the Trustee to detail and provide actual or substantiated values of assets. The effect of this new procedure expects to eliminate any underestimation of asset values thereby increasing tax revenue. On obtaining a Certificate of Appointment, the Trustee must file the Information Return to the Ministry within 90 days.
Can Debt Against an Asset Be Deducted? Yes and No
The Information Return asks for a list of “the market value of the assets and the balance of all bank accounts.” For real estate, the form wants the market value of each property at time of death less any encumbrances registered against the property. For registered lines of credit, only the actual amount owed is deducted and not any unused portion. With respect to assets other than real estate (such as “vehicles and vessels”), debt or encumbrances against these assets cannot be deducted from their value.
Other assets: The return asks for a list of additional assets:
- Details of shares, stocks, bonds and other investments;
- Business interests, copyrights, patents, trademarks, household contents, art, jewelry, loans receivable,
Supporting Documents And Audit
Unless asked, all documents substantiating the valuation of the assets must be kept and made available should the Ministry want to see them at a later date. The Ministry suggests using professional valuators “with expertise in a particular area” to assist in authenticating values, such as The Appraisal Institute of Canada and the Canadian Association of Personal Property Appraisers.
If asked for, a clearance certificate will not be issued and the estate can be reassessed within four years after the tax is payable. Using a good estate lawyer would be worthwhile.