Disclaimer: This article is not a substitute for legal advice. No action in regard to your particular matter should be taken until you have first sought full legal or professional advice from a lawyer fully retained to act on your behalf.
What is Probate? When is it needed?
Probate refers to the process of the court recognizing the will as the last version,which willbe administered and grants the “trustee” (or executor”) the authority to administer the estate.
Even though the most common court submission is an “Application for Certificate of Appointment of Estate Trustee with a Will,” submissions can have different names because there are many variations of the process. In general, the process involves submitting the original will, proof of death certificate, documentation in the form of an asset report, and an application to the court.
Certified funds payable to the Minister of Finance are required to be submitted at the same time to pay Estate Administration Tax (approximately 1.5% of the value of the estate) and can be calculated here:
Probate is only required if the assets owned by the estate require a Certificate of Appointment (COA), or equivalent document,in order to transfer the assets. Many financial institutions require the COA to confirm the executor is the correct person and the will is valid, thereby protecting them from the liability of providing authority to the wrong person (whether by accident or by fraud).
Almost all real estate in Ontario requires probate if owned only by the deceased. However, if there are no individually owned assets requiring this process (i.e., all assets can be transferred without a COA or equivalent authority) the government does not require probate to be completed. The trustee(s) granted a COA are required to file an Estate Information Return within 90 days of receiving the COA.
Sometimes a trustee will still want to apply for probate to confirm they are administering the correct will. Other reasons include the following:
the deceased person died without a will
the will of the deceased does not name an estate trustee
there is a dispute about who should be the estate trustee
there is a dispute or potential dispute about the validity of the will
some beneficiaries named in the will are not able to provide legal consent
In general, the value of the estate for calculating Estate Administration Tax should include the following, valued at the date of death:
real estate in Ontario (less encumbrances)
investments (e.g., stocks, bonds, trust units, options)
vehicles and vessels (e.g., cars, trucks, boats, ATVs, motorcycles)
all property of the deceased which was held in another person's name
all other property, wherever situated, including:
goods, including household contents
business interests, and
insurance (if proceeds pass through the estate, e.g., no named beneficiary other than “Estate”)
You can exclude the following, from the above:
RRSPs, RRIFs, TFSAs and life insurance - but only if a designated beneficiary has been named on the product and the beneficiary is living at the date of death
Real estate that was held jointly with a right of survivorship (held as Joint Tenants, not as Tenants in Common)
Other assets held jointly with a right of survivorship (assets held with spouses are presumed to be held this way - whereas assets held with others are presumed to be held in trust for your estate, so should be included unless there is a clear intention that there is to be a right of survivorship)
Items dealt with in another will (limited to assets named) that deals with assets that do not require probate to be transferred
GENERAL TAX INFORMATION OR CONSIDERATIONS
A deceased person is deemed to have disposed of all their assets immediately before death
All proceeds of this disposition are deemed to be received by the deceased, so must be accounted forand taxed as income, capital gain, etc. as applicable
This includes investments like RRSPs that may have been accumulated on a tax deferred basis (which means such items are treated as though the deceased person cashed out his or her policy just before dying)
A final tax return is required for a deceased person (which includes gains from the deemed disposition), and an estate will be required to file at least one tax return for the estate
An accountant or financial advisor is best placed to discuss the likely tax consequences of a death
We recommend a trustee obtain accounting advice prior to any interim distribution to beneficiaries, to ensure sufficient funds are held to pay taxes, and that a trustee obtain a clearance certificate from the CRA prior to a final distribution of an estate
For more information on tax filings for a deceased person: https://www.canada.ca/content/dam/cra-arc/formspubs/pub/t4011/t4011-18e.pdf