By Patty Fleischman

When drawing up a will it is important to remember that your estate is not passed on to your heirs tax free. So what you think is generous, so does the government, and they want a piece of that generosity. When you die, your legal representative has to file your final tax return to the Canada Revenue Agency (CRA) and pay any tax owed up until the point of death. This includes taxes on some of the assets you owe, such as your car, your cottage and certain types of investments. (Your principal residence is a notable exception to this tax.)

According to Dale Barrett, Managing Partner of Barrett Tax Law, “Upon death it is important to remember that for tax purposes it is as if the deceased sells all of their assets to their estate at fair market value.

That means that if they have any properties (other than a principal residence which is not taxable) or if they have any capital assets (gold, artwork, stocks, investments, etc.), and if these assets have a fair market value at the time of death which exceeds their purchase price, then there is a capital gain which is taxable. This capital gain is the difference between fair market value at death and the cost to the taxpayer. For example, a stock portfolio which cost $10,000 and which is valued at $80,000 at the time of death will result in a capital gain of $70,000. This is taxable. And like all capital gains, 1/2 is tax-free and the other 1/2 is subject to the capital gains tax.

If the taxpayer has other assets which are worth less than the amount paid, or if the taxpayer has a capital loss which can be carried forward, then they can offset any capital gain with the capital loss.”

Ontario Estate Administration Tax (Probate Fees)

When a person dies in Ontario, their estate may be subject to Estate Administration Tax, commonly referred to as "probate fees." This is a provincial tax that may apply when an estate certificate (commonly known as probate) is applied for and issued.

How is Estate Administration Tax calculated?

For estate certificates applied for on or after January 1, 2020, the Ontario government provides the following calculation:

Estates valued at $50,000 or less: No Estate Administration Tax is payable.
Estates valued over $50,000: $15 for every $1,000, or portion of $1,000, by which the value of the estate exceeds $50,000.

The tax is based on the value of the estate as of the date of death, subject to the rules governing what property is included in determining the estate's value.

Example

If an estate is valued at $240,000:

First $50,000 → No tax
Remaining $190,000 → $240,000 − $50,000 = $190,000
$190,000 ÷ $1,000 = 190
190 × $15 = $2,850

Therefore, the Estate Administration Tax on an estate valued at $240,000 would be $2,850.

Important note

The rules surrounding estates, probate and Estate Administration Tax can be complex, and the amount payable can depend on the circumstances of the particular estate. This information is provided for general information purposes only and should not be relied upon as legal, tax or financial advice.

For the most current information, please refer to the Ontario government's Estate Administration Tax information and the applicable legislation.

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