Services

Estate Administration

 January 1, 2013, IMPORTANT CHANGES came in to effect as to how estate administration tax "EAT" (formerly called “probate tax”), is assessed and collected in Ontario.

The role of an executor is not an easy one.  Professional executors know that there can be up to 70 administrative tasks that can take months, and even years to complete.  As an executor, it is important to know what your responsibilities and liabilities are.  Estate trustees (executors) will need to understand how these changes affect their estate value decisions and the risks involved with incorrect valuation of assets.

Some of the noteable changes are:

• Responsibility for administering the EAT is moving from the Attorney General to the Ministry of Revenue (MNR).
• A formal audit, assessment and objection process will be implemented.  The MNR has been given broad audit powers and may issue an assessment or reassessment within four years of the date the tax is payable, or indefinitely if no EAT return is filed, or misrepresentation due to negligence, etc. is made on the return.
• It will be an offence for any person to make, or assist in making, a false or misleading statement (or omission of the relevant facts) in connection with the filing for a certificate.   Such an offence is to be punishable by fine, imprisonment, or both – the minimum fine being $1,000 and maximum being twice the EAT payable. 

These changes may significantly increase an executor’s need
for accurate values of an estate’s chattels.

Reference:  Bill 173, Better Tomorrow for Ontario Act: Schedule 14

The Transitions Team will continue to investigate the requirements for the proposed changes and post updates as additional details are released. 

HELP IS AVAILABLE:

Appraisal Services 

Waddington’s experienced team of specialists can prepare appraisals for anything found in an estate.  Our appraisals are well researched with objective justified values that can be prepared to ISA and USPAP standards, and are kept on file for seven years.

What to appraise?

There is a misconception that a ready-made list exists which sets out and defines property that must be valued and included for the purposes of determining estate fees.

In Ontario, the Estate Administration Tax Act confirms that the estate must pay a tax immediately upon the issuance of an estate certificate.  The estate certificate includes a grant of probate.  Under the definition provisions of the Act, the “value of the estate” for the purposes of determining the amount of tax to be paid includes “all the property that belonged to the deceased person at the time of his or her death”.

All the property?  Unfortunately the word “all” in the tax act does not provide further clarification and is not defined with any detail.  Because of the provisions contained in this section of the Act, it can be difficult to limit the property of the deceased to be included in the application.  

The EAT is calculated on the total value of the deceased's estate wherever situation, that is sworn/affirmed to the application for a certificate of appointment of estate trustee under "Value of Assets of Estate".  The formula for calculating the amount of tax is set out in the Estate Administration Tax Act, 1998 as follows:

• $5 for each $1,000, or part thereof, of the first $50,000 of the value of the estate, and
• $15 for each $1,000, or part thereof, of the value of the estate exceeding $50,000.

JANUARY 2013 UPDATE:

Did you know?  
As part of Canada Revenue Agency's increased focus on tax compliance for trusts and estates, in the last couple of years it has made the following additions to its compliance program:

• Ontario Region Trust and Estates Coordinator – the person in this position is tasked with, among other things, coordinating and prioritizing the estates and trusts related tax issues that concern the province;
• Regional Trust Team – this team is engaging in substantial audit activity in the Golden Horseshoe region, concentrating on Mississauga, Hamilton, Kitchener, London and Windsor; and
• Related Party Initiative – this initiative focuses on high net-worth persons with net assets of $50 million or more, and who have 30 or more related economic entities (including trusts, corporations, partnerships, joint ventures and private foundations). 

Transitions regularly comes in to contact with items of high value for clients while processing estates – conversely we also often advise clients that preconceived values on some items are unrealistically too high. 

To limit the risks and legal liabilities we recommend you seek the help of our experts to properly appraise the contents of an estate.

Need help with the details?

Transitions.Waddingtons.ca provides end-to-end solutions and will work with you to have the home cleared, maximizing the value of any items that you need to divest, in timely manner.  Sorting, organizing, packing and moving, valuation, dispersal and disposal.  We can handle it all so you don’t have to.

To learn more about our planning services, contact Transitions today.