Probate fees can be a significant expense for estates in Ontario, but there are a few things you can do to reduce them. This article will provide you with a comprehensive overview of probate fees in Ontario, including how they are calculated, what assets are subject to probate, and how to reduce your probate tax liability.
What Are Probate Fees?
Probate fees, also known as estate administration tax (EAT), are a tax that must be paid to the provincial government of Ontario when a person’s estate is probated. Probate is the legal process of administering a person’s estate after their death. It involves gathering and valuing the estate’s assets, paying off any debts and taxes, and distributing the remaining assets to the beneficiaries named in the will.
How Are Probate Fees Calculated?
Probate fees in Ontario are calculated based on the gross value of the estate, which is the total value of all of the deceased person’s assets, minus any debts or liabilities. The first $50,000 of the estate is exempt from probate fees, and the remaining assets are taxed at a rate of 1.5%.
Here is an example of how probate fees are calculated:
Estate value: $1,000,000
Probate fee calculation:
- Subtract the exemption amount: $1,000,000 – $50,000 = $950,000
- Multiply the remaining estate value by the probate fee rate: $950,000 x 0.015 = $14,250
Total probate fee: $14,250
It is important to note that probate fees are payable in full before the estate can be distributed to the beneficiaries.
Here are some additional things to keep in mind about probate fees in Ontario:
- Probate fees are paid to the provincial government of Ontario.
- Probate fees are calculated based on the value of the estate at the date of death.
- There are a number of ways to reduce or avoid probate fees, such as creating a living trust, transferring ownership of assets before death, and making charitable donations.
- If you have any questions about probate fees, you should consult with an estate lawyer.
What Assets Are Subject to Probate?
All assets that are owned solely by the deceased person are subject to probate in Ontario, Canada. This includes assets such as:
- Cash and bank accounts
- Investments, such as stocks, bonds, and mutual funds
- Real estate
- Personal property, such as vehicles, jewelry, and furniture
- Life insurance policies
- Business interests
- CPP death benefits
- RPPs, RRSPs, RRIFs, and TFSAs (if there is no designated beneficiary)
The following assets are not subject to probate in Ontario:
- Assets held in joint ownership with right of survivorship.
- Assets held in a living trust.
- Assets that have a designated beneficiary, such as life insurance policies, RPPs, RRSPs, RRIFs, and TFSAs
- Assets that are located outside of Ontario.
Please note that this is a general overview of probate rules in Ontario. There are a number of exceptions and special rules that apply to certain types of assets and situations. If you have any questions about whether or not a particular asset is subject to probate, you should consult with an estate lawyer.
How To Reduce Probate Fees?
There are a number of ways to reduce probate fees in Ontario, as per the rules and regulations of 2023. Some of the most common strategies include:
- Creating a Living Trust:A living trust is a legal document that allows you to transfer ownership of your assets to a trustee while you are still alive. Assets that are held in a living trust are not subject to probate.
- Transferring Ownership of Assets Before Death:You can also reduce your probate tax liability by transferring ownership of certain assets to your loved ones before you die. For example, you could transfer ownership of your RRSPs or life insurance policies to your spouse or children.
- Making Charitable Donations:Charitable donations can also be used to reduce your probate tax liability. When you make a charitable donation, the value of the donation is deducted from the gross value of your estate.
- Naming Beneficiaries on Assets:Many assets, such as bank accounts, investment accounts, and life insurance policies, can be registered with beneficiaries. When you name a beneficiary on an asset, it passes directly to that beneficiary outside of probate.
- Holding Assets in Joint Ownership withRight of Survivorship: When you hold an asset in joint ownership with the right of survivorship, the asset passes to the surviving joint owner outside of probate.
In addition to these general strategies, there are a number of more complex estate planning techniques that can be used to reduce probate fees. If you have a significant estate, you may want to consult with an estate lawyer to discuss your options.
Here are some additional tips for reducing probate fees in Ontario:
- Plan ahead. The earlier you start planning for your estate, the more time you will have to implement strategies to reduce your probate tax liability.
- Keep your records up to date. This will make it easier for your estate trustee to administer your estate after your death.
- Talk to your loved ones about your estate plans. Let them know what assets you own and what your wishes are for your estate.
By following these tips, you can help to reduce the burden of probate fees on your loved ones.
When Is Probate Required in Ontario?
Probate is required in Ontario in most cases where the deceased person owns assets in their own name. However, there are a few exceptions. For example, probate is not required if the estate is passing from the first spouse to die to their partner, and all of the assets are held in joint ownership with the right of survivorship.
How To Pay the Probate Tax?
To pay the probate tax in Ontario, you must file a probate application with the Superior Court of Justice and pay the probate tax at the same time. The probate tax can be paid by certified cheque or money order made payable to the Minister of Finance.
Here are the steps on how to pay the probate tax in Ontario:
- Gather all of the necessary documentation, including the deceased person’s will, death certificate, and a list of all of their assets and liabilities.
- File a probate application with the Superior Court of Justice. You can do this online or in person at the court.
- Pay the probate tax. The probate tax can be paid by certified cheque or money order made payable to the Minister of Finance.
You can mail the probate application and tax payment to the appropriate court location or file your probate application with the court by email. To file by email, you must follow the process in this Superior Court of Justice notice.
Here are some additional things to keep in mind:
- The probate tax must be paid in full before the probate application can be processed.
- If the estate does not have enough cash to pay the probate tax, you may be able to defer the payment. However, you will need to provide the court with a reason for the deferral and a plan for how you will pay the tax in the future.
- You can get help paying the probate tax from a number of sources, including your estate lawyer, a bank, or a credit union.
- If you are planning to mail your probate application and tax payment, make sure to send it by registered mail so that you have a record of when it was sent and received.
- If you are filing your probate application by email, be sure to follow the instructions carefully and attach all of the required documentation.
- Keep a copy of all of your probate paperwork for your records.
By following these tips, you can help to ensure that your probate application is processed smoothly and that you pay the probate tax correctly.
What To Do If You Are Facing Probate Fees?
If you are facing probate fees, there are a few things you can do:
- Gather all of the necessary documentation. This includes the deceased person’s will, death certificate, and a list of all of their assets and liabilities.
- File a probate application with the Superior Court of Justice. You can do this online or in person at the court.
- Pay the probate fees. Probate fees can be paid by certified cheque or money order.
Additional Insights Into Probate Fees In Ontario:
- Probate fees can be complex to calculate:There are a number of factors that can affect the amount of probate fees that are payable, such as the value of the estate, the type of assets that are included in the estate, and the relationships between the deceased person and their beneficiaries.
- Probate fees can vary from province to province:The probate fee rates in Ontario are higher than the probate fee rates in most other provinces in Canada.
- There are a number of ways to avoid or reduce probate fees:Some common strategies include creating a living trust, transferring ownership of assets before death, and making charitable donations.
When it comes to probate, it’s essential to avoid common probate mistakes. If you are concerned about the impact of probate fees on your estate, you should speak with an estate lawyer. An estate lawyer can help you develop a plan to reduce your probate tax liability and protect your assets.
