According to The Globe and Mail, “61 percent [of Canadians] don’t feel knowledgeable about things such as probate – the legal process of validating a will in court and distributing assets…”
We are firm believers that knowledge is power. The more you understand, the more prepared you will be for the future and the simpler the process will be for your loved ones after you are gone.
Here’s what you need to know about Estate Administration Tax.
What is Estate Administration Tax (EAT)
Estate Administrative Tax (EAT) is also known as probate fees. There’s no way of being exempt from paying them, but there are a few things to consider that may reduce the amount that your beneficiaries will have to pay from your estate after you are gone.
The EAT is a tax imposed by the Ontario government based on the value of the estate at the time of the estate holder’s death.
EAT is only applicable on estates that go through probate which happens in these circumstances:
- If the deceased does not have a will and owns assets that require probate to administer.
- If the deceased does have a will and owns assets that require probate to administer.
- Assets that require probate to administer are assets in the estate that are not jointly owned by a survivor or do not have a designated beneficiary.
How can I figure out how much EAT my estate is going to have to pay?
The Government of Ontario has a section on their website that is dedicated to providing a detailed explanation of Estate Administration Tax, which we encourage you to visit for more information.
This site also includes a very handy “Calculating the Estate Administration Tax” function: https://www.ontario.ca/page/calculating-estate-administration-tax
How to reduce the amount of EAT payable
As we have already pointed out, you can’t get out of paying EAT or probate fees, but there are few steps you can take to minimize the impact after you are gone.
- Write a will with a trusted estate planning lawyer. While this may not reduce the amount of EAT payable, it will simplify the probate process for your loved ones. We have the basics that you need to know about writing your will here.
- Name a beneficiary on registered financial accounts that allow you to add your spouse or children as direct beneficiaries. When you designate a beneficiary for your assets, the asset is not part of your estate, and therefore is not subject to estate administration tax.
Exceptions to the EAT rules?
As with so many ‘rules,’ there are also exceptions when it comes to EAT.
Your personal – and estate – situation is going to be different than your neighbour’s, even a family member’s. We always recommend reaching out to your trusted estate planning lawyer for advice that works for you and your assets so that there are no unexpected or nasty surprises.
McMurter & Associates is here to help.
McMurter & Associates has been providing estate services for over 30 years in the Durham Region. If you have any questions about your estate transaction, or are looking for guidance in planning your estate, we are available Monday to Friday, 9am until 5pm. Email: info@mcmurter Phone: 905-666-9200.