09/24/2015 12:15 EDT | Updated 09/24/2016 05:12 EDT

Changes to Ontario 'Death Tax' Puts Additional Burden on Grieving Families

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Nothing is certain but death and taxes, and it seems that Premier Kathleen Wynne is managing to make both worse for Ontarians.

On January 1, 2015, onerous new estate rules took effect in Ontario.

When a person dies, their assets are managed by an estate representative. In most cases, that person is the grieving spouse or children.

Ontario has the highest Estate Administration Tax (EAT) the country. The EAT was previously called a "probate fee," but in this rare instance of honesty the Ontario government has changed the name to reflect what it really is -- an estate tax.

The EAT rate is currently $5 per thousand for the first $50,000 of an estate, and $15 for each $1,000 after that. So an estate valued at $240,000 would pay a $3,100 in EAT. A $1 million estate would pay an EAT of $14,500. In other provinces, the rate is a flat set amount, or does not exceed $7 per $1,000 compared to Ontario's $15.

And of course, the EAT is paid on top of the taxes that Ontarians pay on the investments and assets they spend their whole lives working hard to acquire and leave to their children.

Starting this past January, the rules around becoming an estate representative changed to create a great deal more work, and increased liability.

Under the old rules, staff at the local court would assess and collect the Estate Administration Tax based on a sworn statement listing the deceased's assets and their value. Under the new rules, the tax is not collected at the court. Now, the representative must apply for the Certificate of Appointment, and within 90 days, submit an "Estate information Return" to the Ministry of Finance. The Return must include a breakdown of the fair market value of each asset owned by the deceased on the date of death, and a detailed description of the assets. This requires onerous appraisals and valuations, and the detailed collection of information.

If the estate representation finds a mistake in the Return, a correction must be made within 30 days.

Failure to comply with these new burdensome rules can result in fines starting at $1,000, imprisonment for up to two years, or both.

And liability for the estate representative does not end when the estate is wound up. The Ministry of Finance has four years from the date of the Return to reassess the assets. These rules are making some Ontarians hesitant about acting as an estate representative for their loved ones, which is a terrible position for the Ontario government to put its citizens in while they are going through what is always an emotional time.

There are strategies that Ontarians can use to legitimately reduce the amount of EAT they pay. And now that the government is trying to squeeze every penny out of their death tax, Ontarians should probably consider speaking with an estate lawyer or accountant in order to plan their estate in a way that minimizes the EAT. However, this is an additional expense that many hardworking Ontarians cannot afford. Accordingly, the EAT can end up taking a bigger proportional bite out of those smaller estates.

There is currently Private Members Bill 120, the Estate Administration Tax Fairness Act, which seeks to roll back and cap the EAT. There's nothing that can be done about death, but passing Bill 120 could do some much needed help to reduce taxes.


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