For a number of years, the Province of Ontario has levied a probate tax known as the estate administration tax. The first $50,000 of an estate is exempt, but beyond that a levy of 1.5% is administered by the provincial government rounding up to the nearest $1,000 value. The only deduction from an estate’s valuation are registered mortgages or encumbrances against real estate. So, it is not the value of a house that is subject to the tax, but rather its net value after deducting any registered mortgages. All other assets are simply taken at market value. Other non secured debts of the estate are not a deduction.

It is mandatory that the estate administration tax and the required Estate Information Return “EIR” is filed with the application for probate and that the tax is paid at the time of the filing of the application.

It is a mandatory obligation not only of the executor but also the lawyer that facilitated the filing of the application and the return that is required. The Will and Estate Lawyers at Dale Streiman Law L.L.P. are experienced in this aspect of probate.

It is not uncommon for the executor not to have all of the necessary information for your estate lawyer to be able to file the EIR at the time of the filing of the application. Banking records, valuations of assets and other details can take a significant amount of time and often executors do not wish to wait until all of that information is available before filing. Frequently, an application may be filed on the basis of it being an estimate with a requirement that upon the information being obtained that an amended EIR must be filed and if any further taxes are owing, they are to be paid.   Wills and Probate Lawyers who specialize in this area understand the nuances of this process.  Something lawyers who dabble in Estates, such as general practitioners fail to understand.

This cumbersome probate application and these taxes are the reason that we have developed the “Full Monty” probate avoidance strategy. Using our search function, you can look up details with respect to the “Full Monty”.

It is a serious offense under The Estate Administration Tax Act to file a false statement or to facilitate the filing of one. One can even be imprisoned up to two years for such an action. Furthermore, the EIR is a sworn affidavit, and it is a criminal offense to swear a false affidavit.

Another issue is seeking a refund if one innocently puts forward an exaggerated value of an asset based upon an erroneous assumption. This leads to an extremely difficult scenario of seeking a refund which cannot be obtained unless the application was put forward as an estimate.

The filing of the Estate Information Return and the payment of the estate administration tax is something that our firm regularly assists our clients with. It is baked into the service we provide and occurs on every estate we seek probate. Another issue is an estate that has no money aside from those assets that are reflected within the application for probate. As an example, the only asset of an estate is a house, and until it is sold there are no funds to pay the estate administration tax. With some difficulty, one can make an application to the court seeking a deferral of the payment of the estate administration tax. The judges of the Toronto court who have wide influence across the province have indicated that they will no longer automatically grant such a dispensation but will require the executor out of their own personal funds to pay the estate administration tax at the time of filing.  Tricky stuff and needs the hand of experienced probate lawyers.

More and more individuals are looking for assisted reproductive techniques. The question for Will and Estate lawyers is what advice to give and how does this impact a will. The law on this touchy subject is the Assisted Human Reproduction Act , “AHRA” which replaces common law/property law across the country. One can only use reproductive material in accordance with the AHRA. You cannot simply gift in one’s Will your reproductive material. This should have been canvassed with the clinic in which the sperm or embryos were stored for later use. The question from a Wills and Probate lawyers perspective is what happens with this reproductive material after death. It can only be used by the donor’s spouse or common law partner for their own reproductive purposes. Aside from research purposes no one else can use this material, not even the donor’s family. This is a highly complex area. There are also consent aspects under the AHRA. However, one should make a notation of the existence of such reproductive materials in the willmaker’s Will otherwise there is a very good chance that your executor will not even know that they exist. The Estate Lawyers at Dale Streiman Law LLP can assist with this issue.

The applicability of Ontario law to indigenous persons is a complicated one, and the paramount law is the federal Indian Act. The Ontario Estates Act and Estates Administration Tax Act indicate that for a deceased indigenous person ordinarily living off the reserve, Ontario law applies. This is important as to whether or not the province’s probate tax of 1.5% would apply. This needs careful consideration. A few scenarios arise. If the deceased was a status Indian person, who resided off the reserve and had property off the reserve, the estate administration tax also known as probate tax is payable on the value of that property.

Alternatively, if the deceased was a status Indian person who resided off reserve, had property on a reserve, but that reserve property is being transferred to another status Indian the estate administration tax aka probate tax is not payable on the value of that property. Wills and Probate Lawyers come across this situation regularly.

None of this is simple. When we deal with indigenous client’s their reserve or Tribe often has a legal team that can offer assistance.

A bond is required to accompany any application for a Certificate of Appointment of Estate Trustee, formally known as probate, when there is no Will or if there is a Will when the person applying to be appointed as estate trustee was not named as an Estate Trustee of the Will, or where the applicant neither lives in Canada, or a country that is a member of the Commonwealth. So an Estate Trustee (aka an executor) who lives in Malta as an example, does not need a bond, but your Uncle in Buffalo does. This is set out in the Estates Act, Section 6. Experienced Wills and Probate have to deal with this complication frequently.

Generally, bonds are obtained from insurance companies and there are a limited number of them that will issue a bond. There is a significant premium, and you have to qualify. The purpose of the bond, which generates an expensive premium, is to guarantee that the estate trustee appointed by the court will not abuse or run off with the estates’ assets. The court has the ability to dispense with the necessity of a bond, but that can require a relatively expensive court application. The law on this can be found in The Estates Act section 35 and Rule 74.11 of the Rules of Civil Procedure. The cost of a bond will vary depending on the size of the estate. If the estate is worth less than half a million dollars, the bond premium can be anticipated at between 1.5% and 2% of the estates’ value. If the estate is worth half a million dollars, you can expect a premium of 1% to 2% in the estates’ value, and if the estate exceeds one million in value, the bond premium will be somewhere in the region of 1% to 1.5%. The bonding company will want a great deal of information about the applicant, all directed towards the financial responsibility and liquidity of the applicant. As Will and Estate Lawyers we can assist in negotiating these bonds or drafting a motion for the court to dispense with the bond. The consent of all beneficiaries is generally required, but in the case of a minor beneficiary that is not a enough. In the case of a minor beneficiary (ie under the age of 18) the Office of the Children’s Lawyer must become involved. This now moves to the realm of Estate Lawyers, who have experience in Estate Litigation.

The lifetime capital gains exemption (“LCGE”) is an important one for our readers to be aware of. It is an incentive by the federal government to encourage entrepreneurs to build up a business, and when they sell it, the first $1.25 million of the profit that they have earned by building up the business is tax free. This generally applies to both farms, fishing properties and most commonly to qualified small business corporations, QSBC shares. Specifically, LCGE is generally only available when selling QSBC shares. This is work that must be guided by experienced Will and Estate Lawyers.

To determine if the QSBC shares qualify for the LCGE and to save a significant amount of tax, various tests must be met. 

1. 90% of the assets are used principally in an active business carried on in Canada by the company.

2. The QSBC shares must be owned by a person for two years immediately before the shares sale and 50% of the assets of the company must be used for an active business carried on in Canada, but at the time of the sale it must meet a 90% test. That is that 90% of the assets were used principally in an active business carried on in Canada by the company.

This is a relatively complicated tax question, but it is an important one as significant tax can be saved using such a large tax deduction. Clearly one will require the guidance of experienced tax and legal advisors to take advantage of this.

One can use the LCGE up to the maximum amount, which currently is $1.25 million, however that figure is indexed to inflation so one may not have used it up in the past. This again requires the executor, their lawyer and tax advisors to investigate clearly.

More from the perspective of Will and Estate Lawyers. An executor is deemed to have a fiduciary obligation to the estate’s beneficiaries. A fiduciary relationship calls for the highest level of trust and responsibility upon an individual.. Sometimes an executor, often a family member, will want to buy one of the assets of the estate such as a cottage or house.  Generally speaking, this is not permitted. However, one of the rare instances when it is permitted is when a provision was made in the Will itself that permitted such a purchase. For those long in the tooth such as the author, the Maple Leafs during one of their darkest periods, were owned by the late and some say not so great Harold Ballard. Harold Ballard named as one of his three executors Steve Starvo. Mr. Stavro wanted to buy the Maple Leafs from the estate and normally that would have been absolutely forbidden. However, Harold Ballard in his Will gave Steve Stavros that authority, and while this was debated, the Ontario Court of Appeal permitted that conflict to be waived as it was anticipated and consented to in Harold Ballard’s Will. Experienced Estate Lawyers are well aware of this conflict.

The moral of the story is that if you are drafting a Will and you anticipate wanting to give one of the beneficiaries or an executor the right to purchase an asset of the estate, bring that to the drafting lawyer’s attention. Otherwise, the fiduciary duty between the executor and the beneficiaries, even if you are a beneficiary, is paramount.  Wills and Probate Lawyers have to keep this in mind and ensure their clients understand this point.

Will and Estate Lawyers commonly prepare for couples, Wills that may be described as mirror Wills.  In that sense, the parties provide the very same provisions for the distribution of their estate. Commonly to each other and then their children.  However, a Will is an individual document not a contract.  Justice Cronk in the Ontario Court of Appeal case of Spence vs. BMO Trust Company,  stated “the freedom of an owner of property to dispose of his or her property as he or she chooses is an important social interest that has long been recognized in our society and is firmly rooted in our law”.  Simply put, a Will is an individual document, and the Will Maker can change it at any subsequent time as long as one meets the usual rules of a valid Will.  Experienced Wills and Probate Lawyers understand this fundamental proposition.

However, a Mutual Will is different than a Mirror Will.  In a Mutual Will, generally between spouses, there is an explicit undertaking not to change one’s Will after the first has died. The normal motive is that after the first spouse dies, it is an effort to ensure the surviving spouse does not disinherit their children and are replaced by a new second spouse. However, a Will as we have stated above is a unilateral document and even if a Will says it is a mutual Will,  that still does not stop one from doing a new Will after the first spouse dies. However, what does occur if a valid mutual Will is prepared is the beneficiaries under the old Will who have now found themselves disinherited can sue and impose a constructive trust on those assets that have flowed in the second Will.  There is also the issue of in essence a mutual Will being a form of a marriage contract and is accordingly governed as well by the provisions of the Family Law Act. Full financial disclosure, independent legal advice and other considerations come into effect. However, Mutual Wills are a useful device when attempting to ensure that the children will indeed not be usurped by the unknown future spouse down the road.

It is not enough to simply say this is a Mutual Will. One needs the guidance of experienced Wills and Estate lawyers to prepare one.