What is probate?
Where a person dies leaving a Will, the Executor (now called an ‘Estate Trustee’) obtains their authority to act on behalf of the deceased from the Will. Depending upon the assets owned by the deceased, it is sometimes necessary to ‘probate’ the Will. Probate is the process of submitting the Will to court to ‘prove’ that it is the last Will of the deceased. If satisfied with the documents and information that are submitted, the court will issue what is now called a ‘Certificate of Appointment of Estate Trustee With a Will’. This Certificate enables the Estate Trustee to deal with the deceased’s real estate and provides comfort to the financial institutions that they are in fact dealing with the correct Estate Trustee. When applying to the court, the Executor must also submit a certified cheque or bank draft to pay the required estate administration tax (often referred to as ‘probate fees’).
How is estate administration tax calculated?
To calculate the amount of estate administration tax or ‘EAT’ that is owed, the Executor must accurately determine the value of the deceased’s assets as of the date of death. Generally speaking, EAT must be paid on all assets held in the sole name of the deceased at the date of his or her death. Again generally speaking, EAT will not be payable on assets where a beneficiary has been designated or that are jointly-held; however, there are instances where this is not the case. The only deduction permitted is the amount owing on a mortgage against an Ontario real property which was owned by the deceased at death.
Currently, EAT is $5 per $1,000 of estate value up to $50,000 plus $15 per $1,000 of estate value over $50,000 with no upper limit. However, changes are coming as of January 1, 2020. At that time, EAT will be eliminated on the first $50,000 of estate value and the current rates will continue to apply to the value of the estate exceeding $50,000.