In an article earlier this year, I outlined the basics of the new Estate Information Return (“Return”), which became mandatory in Ontario on January 1, 2015. Since then, there has been a lot of misinformation circulated, much of it through the internet. The world wide web can be a great source of information and a terrible source at the same time. One of the myths is that estate taxes (actually, they are estate administration taxes which are commonly called probate fees) have increased. That is not true. Probate fees, which are calculated on the total value of the estate, are $5 per thousand for the first $50,000 (ie .5%), and $15 for each $1,000 after that (ie 1.5%). Thus, for an estate valued at $400,000, the total tax would be $5,500. It is important to understand that this tax is only payable if an application has to be made for a certificate of appointment (commonly called letters probate). If no probate is required, no tax is payable. Probate (essentially the court authenticates the will) is needed by financial institutions to deal with estate assets if they are significant (each institution has its own threshold). Also, probate is needed in most situations where real estate is an asset. Many estates do not require probate because the assets go to a beneficiary or they are jointly owned with someone else (eg a spouse).
Anyway, back to the need for Estate Information Return. The rationale for the Return is obvious. The Ontario Government wants to collect as much tax as possible. (It is estimated that $143 million was collected in 2013-14). It obviously concluded that estate trustees (commonly called executors) were undervaluing and/or leaving out assets in applications for letters probate. The Return has to be filed by the estate trustee within 90 days after the certificate or probate is issued by the Court. The Return and a Guide to complete the Return are available on the Ontario Government’s website at http://www.fin.gov.on.ca/en/tax/eat/. The estate trustee is required to certify that the information in the Return is correct. Failure to comply can result in fines of up to $1,000 and imprisonment for up to 2 years. It still remains to be seen how aggressive the Ministry will be in enforcement. If you are acting as an executor, it is important to provide the necessary information to your professional advisor. You might also consider getting the applicable insurance coverage.