Saturday, October 21st, 2017

Ontario Estate Administration Tax (EAT) 2015 changes

The beginning of 2015 saw a dramatic change in how estates in Ontario are administered. The stated goal of the legislative change is to “enhance compliance” – which really means an attempt at collecting more tax.

The process of court certification of a will that gives the executor (officially known as an “estate trustee) the power to act was formerly known as “probate”, and along with it came a court charge known as a probate fee.  While the among of this charge has not changed it is now identified as an Estate Administration Tax or EAT.  The charge is $5 per thousand of estate value up to $50,000 and $15 thereafter.  The EAT is due when the probate application if filed.

Until 2015, filing had to include only three values: personal property, Ontario real estate and a deduction for encumbrances on real estate.  On request the executor had to substantiate the numbers. Now, the estate must file an Estate Information Return (EIR) within 90 days of the court issuing the Estate Certificate, and it must be amended within 30 days of significant changes being identified. The executor is obliged to keep an eye on the valuations for four years and the government may assess or reassess within this time.

A major difference is the quality of information that must be filed: the fair market value of ALL assets at the date of death is required, and all this must be supportable with strong valuation methodology such as the use of professional appraisers. Also, identifying information such as addresses or account numbers is required.

If the executor fails to file a EIR or amendment, or makes false or misleading statements, there may be fines from $1,000 to up to twice the EAT and a potential prison term of up to two years.  These penalties are a drastic change, very intimidating and indicate how serious Ontario is about enforcing the Estate Administration Tax.

It is a good question whether this change will cause any increase in tax revenue since it will more strongly motivate people to find ways to avoid having assets pass through their estate.

The Ontario Estate Information Return can be seen here and the Guide here.

Please note that in 2015 David added the Certified Executor Advisor (CEA) designation to his qualifications in order to be able to better serve clients needing help planning and administering estates.

 

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