Jan 6, 2025
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
Stacie Chrysanthopoulos
Nothing contained in this post constitutes legal advice or establishes a solicitor-client relationship. If you have any questions regarding your legal rights or legal obligations, you should consult a lawyer.
Jan 6, 2025
One of my favourite parts of working as an estate litigator is that our files intersect with so many areas of law. Our clients come to us for our expertise and advice on estate and capacity law, but their complex legal problems often require answers outside our expertise.We work with our clients to find experts in areas of law like tax, employment, family, business, and real estate law, to provide a comprehensive answer to our clients’ legal problems.
Not surprisingly, family law regularly interacts with estate litigation. For example, a surviving spouse may elect to make an equalization payment claim under the Family Law Act rather than take what they are entitled to under their spouse’s will. A surviving spouse may choose to make an equalization claim and, at the same time, a dependant support claim under the Succession Law Reform Act.
Tax law often comes into play in estate litigation. When you die, your assets are deemed to have been disposed of, potentially triggering capital gains tax. When working on a piece of estate litigation, we often work with expert tax lawyers to help us assess the estate’s tax liabilities. When we help our clients negotiate a settlement, we consult with tax experts to help beneficiaries and estate trustees minimize tax liabilities.
Corporate law issues often arise in estate litigation, as well. Often, we act as or represent an estate trustee for estates that own businesses. When this is the case, we may consult a business lawyer to help us find the most practical way to transfer or sell the business or to determine its assets and liabilities.
Employment law is another area that regularly comes up in estate litigation if the deceased owned a business. In such cases, the estate trustee may have to worry about employment contracts as well as ongoing wrongful dismissal claims.
Finally, real estate law frequently intersects with estate litigation. Whether it’s a family home, cottage, or investment property, disputes often arise over ownership of the property, the property value, or whether an estate property should be sold (and for how much) or kept in the family.
Estate litigation does not happen in a vacuum. Although our clients may retain us to assist with a will challenge or a dependant support claim, for example, other areas of law are sure to pop up over the course of the litigation. It’s our job to find lawyers with the right expertise to work with so we can, together, provide helpful and tailored advice to reach a resolution as quickly and efficiently as possible.
Cara Zacks
Nothing contained in this post constitutes legal advice or establishes a solicitor-client relationship. If you have any questions regarding your legal rights or legal obligations, you should consult a lawyer.
Dec 3, 2024
Billionaire and philanthropist Warren Buffet is one of the most successful businessmen of all time. In 2006, the “Oracle of Omaha” pledged to give away 99% of his wealth to charitable foundations and has asked other billionaires to commit to donating at least 50% of their wealth to charity.
Recently, Buffett penned a letter regarding some changes to how his wealth will be distributed after his death. His original plan was for his three children to act as trustees to distribute his money after his death. But, because Buffett’s three children are now 71, 69, and 66, he recognized that it might take longer than his children’s lifetimes to distribute his massive fortune.
Thus, Buffett appointed three successor trustees, all younger in age than his children, to take over the distribution of his wealth in the event that his children die before they can disburse all of his assets.
While I could write several blog posts on the duties and responsibilities of trustees and successor trustees, that is not the focus of today’s post. What I found most interesting in Buffett’s letter was his commentary on parents making wills and involving their children in that process.
Buffett suggested that parents should have their children, once mature, read their wills before they are executed. He wrote:
Be sure each child understands both the logic for your decisions and the responsibilities they will encounter upon your death. If any have questions or suggestions, listen carefully and adopt those found sensible. You don’t want your children asking “Why?” in respect to testamentary decisions when you are no longer able to respond.
He continued:
I change my will every couple of years – often only in very minor ways – and keep things simple. Over the years, Charlie [Munger] and I saw many families driven apart after the posthumous dictates of the will left beneficiaries confused and sometimes angry. Jealousies, along with actual or imagined slights during childhood, became magnified, particularly when sons were favored over daughters, either in monetary ways or by positions of importance.
Charlie and I also witnessed a few cases where a wealthy parent’s will that was fully discussed before death helped the family become closer. What could be more satisfying?
I think Buffett’s suggestions are well-intentioned and can benefit families that are not dysfunctional or fractured in the first place. It is almost always a good idea to express your testamentary wishes to your family members and educate them on the details of your estate before you pass away. Not only so they aren’t shocked about what they are entitled to receive (or not) under your will or what your estate assets comprise of (or not) when the estate is being distributed, but also so that your loved ones are prepared for the duties and responsibilities associated with the estate administration, e.g. as named estate trustee or trustee of testamentary trusts. Parents may wish to deliver a letter to their children setting out their wishes and reasons behind them, à la Warren Buffett, or they may wish to have a family meeting or series of family meetings to discuss their estate plan and answer their loved ones’ questions.
This process may not work where existing dynamics between the testator (often the elderly parent) and the person expecting to inherit are imbalanced. Where there are concerns about the elderly parent’s safety or wellbeing if their testamentary wishes are disclosed, this process may not be advisable.
As an estates litigator, I see complex family dynamics play out in very real (and time-consuming and expensive) ways after a testator’s death. Whenever possible and practicable, a frank and open discussion about a parent’s estate plan and testamentary wishes can go a long way to avoid costly litigation and keep family relationships intact after the parent’s death.
Zara Wong
Nothing contained in this post constitutes legal advice or establishes a solicitor-client relationship. If you have any questions regarding your legal rights or legal obligations, you should consult a lawyer.
Nov 27, 2024
Disputes involving Wills and Estates often focus on legal complexities, family dynamics, and the emotional challenges that come with the loss of a loved one. However, one important factor that deserves further recognition is the impact of mental health on the litigation process.
Mental health plays a key role in estate litigation, as strong emotions often affect everyone involved – whether legal professionals, clients, or family members. These emotions can influence the entire resolution process.
Grief is a powerful emotion, and when combined with loss of control, financial uncertainty, or feelings of betrayal, it can lead to heightened stress, sadness, and frustration. These emotions do not go unrecognized and are often present during the initial stages of contacting a law firm. To help ease this process, you can refer to our previous posts, “The Intake Clerk and a Potential New Client” or “What Do I Need When Contacting an Estates Lawyer?”. They provide guidance on the initial steps and can help with what might otherwise be a stressful and emotional journey.
The emotional ups and downs of legal proceedings can be overwhelming, but there are ways to make the journey more manageable. Here are a few suggestions to help you stay supported and grounded:
- Mental Health Support: Having access to a mental health professional through therapy or counselling can help you cope with grief, manage emotional stress, and clear your mind.
- Feel the Emotions: It is normal to feel a wide range of emotions during the litigation process, but it is important to allow yourself to acknowledge those emotions, rely on support, and trust your legal professionals. By understanding these emotions early on, we can work together to ease the emotional strain that can intensify conflict and prolong the process.
- Communication: Clear, simple communication is key. A lawyer’s job is to make legal information easy to understand and accessible to clients, which helps reduce confusion and stress. It also makes the entire process smoother and less intimidating.
- Conflict Resolution: Mediation, when brought forth by your lawyer, offers a more collaborative, less adversarial path to resolution. It encourages all parties to work together toward a solution in a supportive environment.
As the holiday season approaches, emotions can run high, especially for families facing legal challenges. It’s important to make time for self-care and prioritize your well-being. If you or a loved one is in need of support, here are a few mental health resources linked below:
Distress Centres of Greater Toronto
Centre for Addiction and Mental Health (CAMH)
Health Canada
211 Ontario
Emilia Szczepkowski
Nothing contained in this post constitutes legal advice or establishes a solicitor-client relationship. If you have any questions regarding your legal rights or legal obligations, you should consult a lawyer.
Nov 5, 2024
A good executor wants to respect the Deceased’s wishes. But when it comes to the choice of lawyer, the Deceased’s wishes shouldn’t carry the day. Many executors mistakenly think that the lawyer whom the Deceased hired to draft the Will should be the one to “probate” it (i.e., submit it to court along with an application for a Certificate of Appointment of Estate Trustee). And unfortunately, some lawyers seem to make the same assumption, and hold themselves out as effectively already hired for the job.
That assumption is especially common when the drafting lawyer has been storing the Will in the meantime, and the executor needs to contact them to get the original. Rather than releasing the Will, sometimes the lawyer starts discussing the content and timing of a probate application, as though they own the Will or have some right to be hired for the job of probating it. While this may be inadvertent, it leads to unfairness. The client does not realize they have a right to review retainer terms (including cost!) upfront and to say no if they don’t like those terms. Clients might pay more than they want or need to, or end up hiring a lawyer they aren’t comfortable with, because they did not understand they have a choice.
The executor can always demand the release of the original Will and take it to a lawyer of their choosing. The testator cannot enter into a future retainer agreement with a probate lawyer in advance of their death, or bind their executor to their choice of lawyer. And legally speaking, the Will is not the property by the lawyer who drafted it, even if that lawyer has agreed to store the Will. A Will is the property of the testator, which means that it becomes the property of the executor after the testator’s death.
The lawyer who drafted the Will has no special knowledge or expertise beyond any other lawyer who does probate. Sometimes, they have less, because probate and estate administration might make up only a very small portion of their practice. And if there is anything contentious involving the Will (for example, a beneficiary has concerns about its validity or is threatening a Will challenge) then the lawyer who drafted the Will should absolutely not be acting for the executor. They are a potential witness and in a conflict of interest. The executor should retain a new lawyer with no involvement in the Will drafting.
If you find yourself named as executor in a Will, know that you are free to choose your own lawyer. As with any other service, shop around. Find the price and the person you feel comfortable working with. While your deceased family member or friend may have chosen to hire that lawyer, you don’t have to.
As a further tip, be cautious if a lawyer tells you that you must pay a fee before they can release the Will to you, or that they are entitled to be paid for their time retrieving it. Ask to see the retainer agreement or other contract signed by the testator entitling the lawyer to be paid a fee for storage or retrieval.
Laura Cardiff
Nothing contained in this post constitutes legal advice or establishes a solicitor-client relationship. If you have any questions regarding your legal rights or legal obligations, you should consult a lawyer.
