Applying for Probate
Applying for probate is the process of registering the deceased’s Will with the Ontario Superior Court of Justice and applying for a “Certificate of Appointment of the Estate Trustee” (the executor). Probate also requires the payment of the estate administration tax.
A Will must be probated in order to formally pass assets from the deceased person to his/her beneficiary. Banks, trust companies and other financial institutions will often require that a Will has been probated to release funds to the estate executor so that the estate executor can administer the estate.
The Estate Administration Tax
The estate administration tax (“EAT”) (formerly known as “probate fees’) is a tax charged on the total value of the deceased’s estate. The value of the estate is the value of all assets owned by the deceased on death and includes:
- Real estate in Ontario;
- mounts in bank accounts;
- All property which was beneficially owned by the deceased (ie, title to the property may have been in someone else’s name); and
- All other property, wherever situated.
Encumbrances (mortgage, secured loan) against any asset other than real estate cannot be deducted from the value of the asset.
Assets that the deceased may have had before death, but not at the time of the death (eg, insurance payable to a named beneficiary and not payable to the deceased’s estate) jointly held property and real estate not in Ontario are not included in computing the value of the estate for EAT purposes.
The current EAT rates are:
- $5.00 for each $1,000 of the first $50,000 of the value of the estate, and
- $15 for each $1,000 of the value of the estate exceeding $50,000.
The EAT on a $1,000,000 estate would be $14,500. The EAT on a $15,000,000 estate would be $224,500.
Avoiding or Minimizing the Estate Administration Tax
- Jointly Held Property
Jointly held property passes to the surviving owner outside of the deceased’s estate (by the right of survivorship) and does not have to be included in the deceased’s Will to pass to the surviving owner. Since the property is not included in the deceased’s primary Will, the property is not subject to the EAT. The property simply passes to the surviving owner.
Owning property jointly is a convenient mechanism to avoid the EAT. However, using joint tenancy is not without negative consequences (or at least has issues that should be considered). Adding a new joint owner may trigger adverse (and/or unexpected) tax consequences where beneficial ownership is transferred.
- Naming a Beneficiary for Life Insurance Proceeds, RRSPs and RRIFs
Life insurance proceeds will not form part of an estate if the payable on death to a named beneficiary, which can be accomplished through the deceased’s Will or directly with the insurer.
Similarly, RRSPs and RRIFs will not form part of the deceased’s estate if he/she names a beneficiary.
- Preparing Primary and Secondary Will
In Ontario, multiple Wills are used as an effective estate planning strategy, particularly by business owners and incorporated professionals, to avoid or reduce EAT. Where there are two Wills, the estate trustee will apply for a “Certificate of Appointment of Estate Trustee with a Will Limited to the Assets Referred to in the Will” and will submit for probate the primary Wil only, thereby excluding the value of the Secondary Estate from the calculation of the EAT. Click here to learn more about Primary and Secondary Wills.
- Gifting Assets
While alive, an individual can gift assets in anticipation of their death. This asset, no longer owned by the giftor, will not form part of their estate on death and will therefore not be subject to probate. However, consideration should be given to the fact that the gift will trigger capital gains for the giftor and the giftor will lose control of the asset.
- Settling a Trust
If assets are held in a trust, they will be dealt with under the terms of the trust rather than as part of the deceased’s estate, which avoids probate. An inter-vivos trust can be created to own assets that would have otherwise formed part of the deceased’s estate. The assets held by the trust will not be subject to the EAT.
 There is no EAT payable if the value of the estate is $1,000 or less.
 See the Ontario Ministry of the Attorney General’s EAT calculator at: https://www.attorneygeneral.jus.gov.on.ca/english/estates/calculate.php.
 This assumes that there are two owners and one owner dies. Jointly held property can have more than two joint owners.