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.
