What's a 'Probate Fee' and How Much Is It?
In Ontario, where a prospective estate trustee applies for a certificate of appointment (colloquially referred to as “probate”), pursuant to s. 2(1) of the Estate Administration Tax Act she is required to pay the estate administration tax (often called the “probate fee”) – the exception being when the value of the estate does not exceed $1,000 - in which case no tax is payable. The fee is made payable to the Minister of Finance (of the provincial government).
The amount payable is based on the value of the estate – it is $5 for each $1,000 of the first $50,000 of the estate and $15 for each $1,000 for the amount over and above $50,000. Our good friends at the Toronto-based accountancy firm Yale & Partners LLP have been kind enough to put together a probate fee calculator which makes estimating the amount owing all the easier!
Before figuring out how much tax is owing, it’s important to understand what assets are included in calculating the value of the estate for probate purposes. An application for a certificate of appointment (such as the one used when the deceased dies with a will) includes a section where the value of certain assets is to be included (and the total value of these assets forms the basis for calculating the tax owing).
Specifically, the assets to be included are the deceased’s real estate in Ontario (net of encumbrances) and the deceased’s personal property (and this includes cash, investments, and personal effects). Note that with the exception of encumbrances on real estate (for example, a mortgage), a deceased’s debts cannot be offset against the assets listed on the probate application – this means that the probate fee is based on the gross value of the estate, not the net value.
There is some property that is not included in the value on the probate application – and this includes real property outside of Ontario and assets that flow outside the estate (such as joint assets, and insurance policies/RRSPs/RRIFs with a designated beneficiary).
There are various estate planning steps that can be employed to reduce the probate fee – however, there are often risks that come in doing so. It’s a good idea to make sure you understand the risks before taking any such steps.