Probate Fees/Taxes
The majority of Canadian provinces have a form of probate fee or probate tax which can be applicable to estate assets upon the death of an individual residing in a specific province.
The probate fees/taxes vary from province to province. In the province of Ontario, for example, the fees/taxes are as follows:
- 0.5% on the first $50,000.00
- 1.5% on the reminder of estate assets.
Thus, for estate assets totaling $250,000.00, these probate fees would be calculated as follows:
- $50,000.00 x 0.5% = $250.00
- $200,000.00 x 1.5% = $3,000.00
The Ontario probate fee was challenged was challenged in the courts. Ultimately, the Supreme Court of Canada ruled that the former Ontario probate fee was unconstitutional. The court gave the Province of Ontario a specific length of time to remedy the problem so as to avoid having to reimburse all probate fees collected over the years by the province. The Province of Ontario in early 1999 passed retroactive legislation which had the net effect of validating probate fees/taxes for the purposes of past, present and future estate administrations.
As part and parcel of estate planning there are a number of techniques that can be employed to circumvent or avoid the probate fees/taxes rule as a part of estate planning strategies including:
- The creation of assets into joint ownership
- The designation of beneficiary for life insurance policies/registered retirement savings plans/registered retirement income funds et al
- The establishment of trusts to pass title to future generations
The consideration of other legal and tax questions must be emphasized such as the following:
- Concerns as to the ownership and/or control over specific assets
- The advantages and disadvantages of including children and/or grandchildren in asset ownership
- The tax impact as material to the probate planning strategy, for example:
- Attribution rules: The income from a specific asset can be “attributed” back to the individual who has transferred title or created a trust;
- Capital gain exposure with respect to assets which have a capital gains potential, i.e. cottages, stocks.
Prior to entering into any form of probate fee strategy, we encourage you to contact one of our lawyers who has extensive knowledge and experience in this area to devise a strategy to understand the legal and tax consequences of your estate plan.
