Ontario Estate Information Return

Investment insight

Ontario’s probate process is governed by the Estate Administration Tax Act (EATA), 1998. This legislation requires an Estate Information Return be filed. Probate fees are assessed based on the estate’s value as reported in the Estate Information Return.

Executors are required to file the Estate Information Return for probate applications as of January 1, 2015. In the past, estate bypass was very attractive. The information required was less than it is now, and the probate fees and other costs associated with the estate only related to assets forming part of the estate for which the certificate of appointment of estate trustee (or similar certificate) was sought.

Probate fees, referred to as estate administration taxes, are levied under the EATA. These taxes are paid when an estate representative (including an executor or administrator of an estate, an estate trustee, etc.) receives a court order certifying that the will of the deceased is valid and that the estate representative has the legal authority to administer the estate. Probate fees levied under the EATA are $15 per $1,000 for assets over $50,000.

We’ve gone from what was largely an honour system to one with considerably enhanced administration and compliance. The duties of many executors, especially those for more complex estates, have become more onerous. Some heirs may have to wait longer to receive their final distribution from an estate than was previously the case.

With appropriate planning, and a designated beneficiary, assets can pass outside the estate. Beneficiary designations are available on registered accounts (e.g., registered retirement savings plans, registered retirement income funds, and tax-free savings accounts, etc.) and insurance policies. Insurance policies include segregated fund contracts, life insurance policies, insurance company guaranteed interest contracts (GICs), and annuity policies (including life and term certain policies).

Other strategies exist for avoiding the fees, including but not limited to the use of alter ego or joint partner trusts, joint tenancy with the right of survivorship (JTWROS), etc. Each situation needs to be reviewed before an appropriate strategy is implemented, as the full implications need to be assessed. For example, a transfer of assets into JTWROS may have income tax implications (possible disposition for tax purposes or application of attribution rules). Other implications, including loss of control, exposing assets to the debts of the other party, etc., need to be considered as well.

Case study

John anticipates that at the time of his death, he’ll have $1 million in assets. His house will be worth $450,000. He’ll have another $550,000 in investments (currently a GIC held at a bank.) He’s considering acquiring an insurance company GIC or conservative segregated fund contract issued by an insurer. Looking at these two scenarios, see the difference in how probate fees are calculated:

 

Estate subject to probate

Anticipated holdings at death

Bank GIC Insurance investment

House

$450,000 $450,000

GIC held at bank

$550,000  

Term fund (or segregated fund contract) issued by an insurer having a named beneficiary

  $550,000

Total asset value

$1,000,000 $1,000,000
Estate subject to probate

$1,000,000

$450,000

Probate fees

   

$15 per $1,000 > $50,000

$14,250 $6,000

Total

$14,250 $6,000

Savings achieved by estate bypass

$0 $8,250

*For illustration purposes only 

***

Under the EATA regulations, the Minister of Finance will be getting a significant amount of data, including a complete list of the assets of the deceased person used to determine the value of the estate. The assets falling into the estate are governed by the will that’s being probated and will be disclosed on Ontario’s Estate Information Return, which will be filed with the Ontario Minister of Finance. The return is due no later than 180 days after an estate certificate is issued to the estate representative.

This filing will be cross-referenced to the application for probate made by the estate representative. As is indicated on the Ministry’s website, “Estate representatives must be able to demonstrate the values of the assets through supporting documents, such as statements, an opinion of value from an appraiser, etc.”1

For assets falling into the estate (including insurance contracts without a named beneficiary), a full description of the asset is required, including the name of the deceased person’s advisor, dealer, financial institution, or other person holding the assets on behalf of the deceased, as well as account numbers if applicable.

The Estate Information Return Guide indicates that there’s no need to include property that the deceased owned as a joint tenant with right of survivorship with other parties. However, we’re reminded in the guide to include “all property in which the deceased had a beneficial interest, even if the deceased did not hold legal title and legal title was held in another person’s name.” In reading these two phrases together, there may be circumstances in which estate trustees may want to confer with legal counsel when deciding whether certain assets that the deceased had transferred to JTWROS should be included in the filing. The Ministry of Finance can audit Estate Information Returns four years after the day the estate administration tax became payable.

Estate representatives should retain records pertaining to the estate assets and their values for a minimum of four years after the estate certificate is issued. There are no time limits when there’s a failure to comply, fraud, or misrepresentation. The provisions provide for fines and imprisonment for certain types of non-compliance.

There’s no doubt that once the return is filed, the Minister will be able to make a more informed decision about which estates to audit. Here we need to bear in mind that there’s much more at issue than the probate fees. The legislation provides that the Minister of Finance may share information with other employees of the Crown for many purposes, including for use “in the administration or enforcement of an Act that imposes a tax or confers a benefit.”2 Income tax implications such as capital gains calculations come to mind, as do benefit programs such as the Ontario Disability Support Program.

On the topic of clearance certificates, we note that the EATA legislation currently doesn’t contain a mechanism whereby the estate representative could obtain a clearance certificate for probate fees. Given the potential for audits and challenges as to the valuation of assets, estate representatives may be hesitant to distribute the last of the estate’s assets until the audit period has elapsed.

It’s clear that the estate representative’s duties have become considerably more complex over time. And as stated above, given the ability for the information to be exchanged by various taxation and other authorities, estate representatives will have to be extremely diligent when making an application for probate and completing the information return for the Minister of Finance.

Advisors should be reviewing estate plans put in place for their clients. Estate bypass using insurance products having named beneficiaries provides significant benefits:

  • avoiding delays associated with settling the estate
  • savings in probate fees and associated costs relating to administering the estate
  • enhancing confidentiality
  • potential creditor protection.

1 See Estate Administration Tax | Ontario.ca for more information. 2 Estate Administration Tax Act, 1998, SO 1998, c 34, Sch, retrieved on 2021-07-12

The commentary in this publication is for general information only and should not be considered investment or tax advice to any party. Individuals should seek the advice of professionals to ensure that any action taken with respect to this information is appropriate to their specific situation. Manulife, Manulife Investment Management, the Stylized M Design, and Manulife Investment Management & Stylized M Design are trademarks of The Manufacturers Life Insurance Company and are used by it, and by its affiliates under license.

MK3099E 07/21

Tax, Retirement & Estate Planning Services Team

Tax, Retirement & Estate Planning Services Team

Manulife Investment Management

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