When acting as a prospective estate trustee in Ontario, it is often necessary to apply to the court for a certificate of appointment of estate trustee. Although it is commonly referred to as “probate”, the certificate of appointment is essentially a validation of a will or, in a scenario where no will exists, an authorization for the estate trustee to manage and distribute the estate of a deceased person.
This certificate may be required in circumstances where the deceased owned real estate or held assets in accounts for which various offices and institutions require the court’s validation. In fact, most financial institutions or land registry offices want to be certain of the appointment in order to avoid being wrapped up in any litigation in the event that money or assets are transferred to the wrong parties.
The application for probate also involves the payment of estate administration tax, or as commonly known as “probate tax” under the Estate Administration Tax Act. The amount payable for this tax depends on the size of the estate and the current tax rates are as follows:
- For an estate valued less than $1,000, there will be no probate tax payable.
- For an estate valued up to $50,000, the rate is $5 for each $1000 or part thereof.
- For an estate valued at over $50,000, the rate is $250 (for the first $50,000) plus $15 for each $1000 or part thereof.
For example, an estate with a value of $240,000 will be required to pay $3,100 in estimated estate administration tax. A larger estate of $1,000,000 will attract $14,500 in estate administration tax.
For estate administration tax calculations, the total value of the deceased’s estate may include assets such as:
- Bank accounts
- Investments (bonds, trust units, stocks, etc.)
- Vehicles and vessels
- Real estate in Ontario (net of encumbrances such as mortgages)
- Insurance proceeds (where proceeds pass through the estate)
- All other property including business interests, goods, intangibles, etc.
There are some assets which flow outside the estate such as those which are held jointly or, pass by way of beneficiary designations. When considering estate planning, a number of steps may be taken to reduce probate fees payable. However, some of these options present other risks which need to be carefully assessed.
Along with the above, there are very onerous requirements placed on an estate trustee to not only manage and distribute the estate, but also to file a detailed estate information return to the Ministry of Finance within 90 days of obtaining probate. It is important to consult a professional to help you with estate planning or, administration services, to ensure you limit your exposure to potential liability. Should you require any assistance or, other estate related services, we would be glad to assist you.
Please note the above serves as general information and not legal advice and is not intended to be relied on as such.Read More
What is the Estate?
When a person passes away, all assets that the individual leaves behind may be referred to as that person’s “estate”. Generally, this could include bank accounts, investments, cash, jewelry, cars, business interests and the like. Sometimes the deceased owns a fractional interest in the asset (such as a part of a company) in which case, the fraction would also be considered a part of their estate.
Upon passing of such individual, the main question that arises is whether there exists a Will or not. In the event that the deceased had a Last Will and Testament, the terms of the Will must be reviewed in order to determine, along with various other items, who would manage the estate and who are the intended beneficiaries.
In the event that there is no Will, Ontario law known as the Succession Law Reform Act sets out the rules and priorities in order to determine who can be a beneficiary of the estate.
During the estate administration process, the Estate Trustee often retains a Lawyer to assist with the process. It is to be noted that there exists a clear distinction between the role of the Lawyer and the Estate Trustee as it is the Estate Trustee who is responsible for decision-making related to the estate, even where a Lawyer has been retained for assistance.
Other things that need to be considered and are often discussed during the initial stages (in no particular order) of the administration are:
- Whether there are particular “wishes” in the Will related to the funeral and or organ donations?
- Are there any U.S. tax consequences as of death (where the deceased had U.S. assets and or citizenship or other connection).
- Consider if there may be any support obligations (stepchildren)?
- Are there non-resident beneficiaries?
- Do other documents (separation or shareholders agreements or orders) exist that need to be reviewed?
- Gather details of the assets including, but not limited to, RRSPs, RRIFs, GICs, Tax returns, insurance policies etc.
- Provide notice of death to family members or others who have an interest in the estate (such as those who have a business interest).
- Identify the deceased’s advisors such as lawyer, accountant, financial planner, who may possess important information.
- Consider and advise of any conflicts (beneficiary disputes; sibling rivalry) that exist with respect to the estate and the terms of the Will.
- Understand and be aware of the entitlements under the Family Law Act along with the limitation period.
- Understand what the role of the Estate Trustee involves, the commitment, the liability that exists along with a complete understanding of their duties and responsibilities prior to acting.
- Realize that prior to acting, an individual may be able to renounce his or her office prior to taking action in relation to the estate.
- Understand the level of diligence required and the need for record-keeping and accounting with respect to the estate.
- Secure and preserve assets including insuring over assets depending on the situation.
- In light of recent case law, consider whether there any joint assets that give rise to a resulting trust?
- Locate and obtain listing of safety deposit boxes.
- Understand the particulars of what constitutes a Graduated Rate Estate.
- Consider whether there are any potential dependent claims that could arise under the Succession Law Reform Act
- Consider whether there are beneficiaries that may be missing and need to be located?
- If necessary, understand the priority that arises under the Succession Law Reform Act for an intestate estate (without a Will).
- Gain access to information about the liabilities of the estate and arrange for payments.
- Close accounts, cards, and advise the appropriate parties and institutions of death.
- Consider whether certain assets need to be insured over.
- Understand that accounting, investment and tax advisors may also need to be retained.
- Know details and amount of the “probate” tax payable
- Be aware of the estate information return requirements of the estate – due within 90 days of issuance of the Certificate of Appointment of Estate Trustee
And many more…
There are various scenarios and steps that may arise as a consequence of death. The estate administration process is a complex process involving an understanding of the role of an Estate Trustee as well as the limitations and liability that are associated. Please be sure to contact an estate lawyer to gain a better understanding in relation to your particular situation.
The above serves as general information and is not intended to be thorough in nature and is not to be relied upon as legal advice.Read More
Today’s post highlights some important items that an Estate Trustee must turn his or her attention to during the administration of an Estate.
In a nutshell, an Estate Trustee’s role includes tasks such as gathering and managing assets, paying debts and expenses, locating the beneficiaries an distributing the estate to those entitled. However, from start to finish, there are multiple items to be taken care of by the Estate Trustee – some simple but others which can be appear more daunting to the unfamiliar. Listed below are some of these tasks:
Certificate of Appointment: depending on the assets that form a part of the estate, an Estate Trustee may be advised that he or she is required to ‘probate’ a Will which is the process of obtaining formal authorization from the Court. This authorization is formally known as the Certificate of Appointment of Estate Trustee and essentially confirms that based on the information provided, the Will, if one was submitted, would be deemed to be the last known Will of the deceased and lists the appropriate individual(s) as the proper personal representatives of the estate. A similar authorization exists if there was no Will to begin with. In order to prepare this application, it will be important to ascertain value of the estate. There are various rules in relation to which assets form a part of the estate and those that are exempt which are important know as they impact the amount of estate administration tax that may be payable into the court. Along with all this, proper notice is required to be provided to those entitled to the estate.
Income Tax: The Income Tax Act of Canada provides that when an individual dies, there is a “deemed disposition” of assets which may give rise to capital gains (or losses) as at the date of death. To determine these figures, an inventory of assets is crucial along with filing the necessary tax returns – and the estate trustee may be required to file the following returns:
- T-1 General return – if the deceased had not filed for previous taxation year(s);
- T-1 Terminal return – covers the year of death;
- T-3 Estate return – this covers income received from any estate assets including interest earned
- Final distribution returns
- Designation of an estate as a Graduated Rate Estate, if applicable, which is entitled to marginal tax rates.
Clearance Certificates: before making final distributions to the beneficiaries, it is important to obtain a Clearance Certificate from the Canada Revenue Agency. The Estate Trustee risks personal liability in relation to the distributions made if it is found later that there are taxes owing which were to be paid. Obtaining this certificate provides assurance to the Estate Trustee that no additional tax is payable.
As one can imagine, a number of other tasks need attention, such as:
- Searches in relation to any judgments owing in the deceased’s name
- Preparation of Estate Accounts
- Preparation of Statement of Accounts as well as releases from Beneficiaries
- Preparing necessary notice to creditors
- And many more…
As an estate trustee, you are entitled to claim compensation in connection with time spent during estate administration. The calculation is based on a percentage of the estate and depends on the nature of the work involved and the amount is usually determined after the estate administration is completed.
It is highly advised that if you have been appointed as an Estate Trustee or want have such an appointment made by the courts, you speak to a professional to gain a clearer understanding of the nature of the role.
This content is only for information purposes and does not constitute legal advice and should not be relied on as such. Please speak to a lawyer for more details.Read More