What is Estate Administration Tax?
An important thing to consider when applying for a probate certificate (or a "Certificate of Appointment of Estate Trustee") is the tax owing on the Estate. This tax is referred to as Estate Administration Tax ("EAT"), and it is based on the total value of all assets held by the deceased as of date of death. Payment of the EAT must be submitted along with your probate application at the time of filing.
There are certain circumstances where Estate Administration Tax is not required. For the purposes of this blog, we will go over how to determine the amount of tax payable when you are applying for a Certificate of Appointment of Estate Trustee (with or without a will).
Calculating Estate Administration Tax
When determining the value of the estate, you should add the values of all assets held by the deceased as of date of death. Liabilities owed by the estate are not subtracted from the value of estate assets, except for any registered mortgages towards a property owned by the deceased. Any accounts held by the deceased that name a designated beneficiary or were jointly held and pass by the right of survivorship should not be included in the value of estate assets.
Estate Administration Tax does not apply for the first $50,000 of the estate. The remaining value of the estate is rounded up to the nearest thousandth and then calculated by applying $15 per $1,000.
For example, if the total value of the estate is $372,782.12:
Step 1: Round to the nearest thousandth
$372,782.12 => $373,000
Step 2: Subtract the first $50,000 of the estate value
$373,000 – $50,000 = $323,000
Step 3: Divide by $1000
$323,000/$1000 = 323
Step 4: Multiply by $15
323 x $15 = $4,845
Once you have determined the amount of EAT owing, you should arrange payment by certified cheque or bank draft made payable to the "Minister of Finance".
It is good practice to always double check your calculations when determining EAT. You may also use an online calculator to assist you with your calculations such as this one: https://www.ontario.ca/page/calculating-estate-administration-tax
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.