Back in 2012, we published an
article forewarning about the proposed changes to the Estate
Administration Tax Act in Bill 173 (Better Tomorrow for Ontario Act
(Budget Measures), 2011). After much discussion and attempts by
various organizations to obtain amendments to the proposed changes,
the regulations giving effect to Bill 173 came into force on
January 1, 2015 and the changes are as onerous as promised.
As a refresher on the estates administration process in Ontario,
when a person dies, the individual(s) appointed to manage the
deceased's assets are known as the estate trustee(s). However,
some assets may not be accessible to the estate trustee until he,
she or it provides evidence of their appointment. In these cases,
the estate trustee must apply for a Certificate of Appointment of
Estate Trustee ("Certificate of Appointment") from the
Ontario Superior Court of Justice and pay an estate administration
tax on the value of the assets of the deceased's estate.
Changes Effective January 1, 2015
Any application submitted on or after January 1, 2015 will be
subject to the new regulation. A new information return must now be
received by the Ministry of Finance within 90 days of issuance of
the Certificate of Appointment. The form of the return and its
contents are prescribed by regulation. One of the items an estate
trustee must now provide to the Minister of Finance is a breakdown
of the fair market value of each asset owned by the deceased on the
date of death as well as a detailed description of the asset. This
will require valuations and appraisals of certain assets and the
collection and recording of more information, which will be a much
more onerous process.
Records and documentation of each asset are a crucial part of
the administration. If the estate trustee becomes aware that any
information submitted in the estate information return is incorrect
or incomplete or subsequently discovers another asset, a revised
return must be filed no later than 30 days after the estate trustee
becomes aware of this information.
There is also no mechanism in place for ending the ongoing
liability of an estate trustee once the estate is ready to be wound
up. The Ministry has four years from the date of the return to
assess. The Ministry briefly considered the idea of providing a
Clearance Certificate to estate trustees but this proposal did not
materialize in the regulation. Failure to comply with the
regulation could result in a fine of not less than $1,000 and up to
twice the amount of tax payable by the estate, imprisonment for up
to two years or both.
What Happens Now?
The additional work and potential liability may result in an
increased reluctance to act as an estate trustee. On that note,
greater consideration should be given as to who would be
appropriate to appoint as estate trustee now that the task of
administering an estate has become more complicated.
Testators may also want to consider arranging their estate plans
so as to minimize the need for a Certificate of Appointment. Estate
planning strategies that were once considered unsuitable for
relatively uncomplicated estates are now under re-consideration as
a result of the new regime.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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