Administration Tax and Capital Gains in Ontario: How Transferring Wealth Before Death Can Reduce Probate Fees

A Globe and Mail article from October 2025 profiles three siblings who, following their father's death, worked proactively with their elderly mother, financial advisers, and professionals to transfer approximately $6 million in family wealth before her passing. 

This story highlights the importance of early planning, clear legal authority, professional oversight, and open communication among family members when managing intergenerational wealth transfers. 

This approach also opens the door for a discussion around personal tax implications of an inheritance.

What's the difference between Estate Administration Tax and Capital Gains? 

Estate Administration Tax (commonly referred to as probate fees) and capital gains tax are separate tax considerations. Estate Administration Tax (EAT) is payable on the value of assets that pass through an estate. In the province of Ontario, there is no EAT applied to the first $50,000 of the value of the estate. 

Capital gains tax may arise on the deemed disposition of certain assets at death, such as real estate. According to the Canada Revenue Agency (CRA) website, capital gains on inherited property is "... the difference between the sale price and the fair market value (plus costs related to the disposition." This sale must be reported in the deceased's final tax return, and the gains are taxed.

Although distinct, these taxes often arise at the same time, which is why both should be considered as part of comprehensive estate planning. 

Is it possible to reduce the amount of EAT payable? 

EAT isn't fun, but there isn't a way to get out of it entirely. However, there are estate planning tools to utilize that can reduce the amount of EAT payable. We go into more detail on that here: https://www.mcmurter.com/blog/estate-administration-tax 

As we have already pointed out, you can't get out of paying EAT entirely, there are few steps you can take to minimize the impact after you pass for your beneficiaries. 

1. Prepare a properly drafted will with an experienced estate planning lawyer. 

   While a will does not eliminate Estate Administration Tax, it can significantly simplify the probate process and reduce administrative complications for your loved ones. 

2. Designate beneficiaries on registered financial accounts. 

   Certain registered accounts allow you to name a spouse or child as a direct beneficiary. Assets that pass directly to a named beneficiary generally do not form part of the estate and are therefore not subject to Estate Administration Tax. 

In the case of the three siblings profiled in the Globe and Mail article, they and their mother chose to gift assets during her lifetime rather than allowing the full value of the estate to pass through probate upon her death. With appropriate estate planning in place, this approach reduced the overall tax and probate burden that would otherwise have applied. 

As stated earlier, these transfers may trigger capital gains for the mother and must be well-documented and reported.

The information provided in this article is meant to inform and to educate. We strongly recommend that if you have legal questions relating to wills or estates, please reach out to a trusted lawyer for advice. 

If you are in the GTA or Durham Region and are looking for an experienced estate lawyer to help with your estate planning, McMurter & Associates has the experience to help you succeed. 

To connect with a member of our firm, send us an email at info@mcmurter.com or call us at 1-800-756-7138 or 905-666-9200 to schedule a consultation.