Ontario Estate Administration Tax: Rates and Selling a House

Ontario estate administration tax is often called probate tax, and people meet it at an awkward moment: while grieving, and often while preparing a parent's house for sale. This guide explains what the tax is, who files, how the rate works, how a house is counted and how the tax fits with the sale. It is general information, not legal or tax advice. Estate law has formal steps and penalties, so use an Ontario estate lawyer for your specific estate.

What is the estate administration tax in Ontario?

Ontario.ca says the tax "is charged on the value of the estate of a deceased person if an estate certificate is applied for and issued." The estate certificate is the court document, often called probate, that confirms who has authority to act for the estate. Ontario.ca explains that probate is normally needed if the deceased owned real property or assets held by a financial institution.

There is no tax simply because someone died. The tax is triggered by applying for the certificate. That is why you will hear that an estate with nothing needing a certificate may not pay it, and why the type of assets matters. A lawyer can tell you whether your estate needs a certificate.

The tax is separate from income tax owed by the deceased. The Canada Revenue Agency treats the deceased as having disposed of property just before death, and a home may qualify for the principal residence exemption if the forms are filed with the final return. See capital gains and selling your principal residence for how that exemption works.

Ontario estate administration tax rates

For applications made on or after January 1, 2020, Ontario.ca sets out two bands.

Value of the estate	Tax
$50,000 or less	No tax
More than $50,000	$15 for every $1,000, or part of $1,000, of the value over $50,000

The province's own example is an estate worth $240,000, which owes $2,850. Because part of $1,000 counts as a full $1,000, the value is effectively rounded up. Rates are set by government and can change, so check the current page when you apply. This guide applies to applications since January 1, 2020, as stated on Ontario.ca.

A smaller-estate option exists too: applicants whose estate is valued at $150,000 or less may apply for a Small Estate Certificate instead of the full certificate.

Who files and who pays

The person named as estate trustee in the will is typically the one to apply. Without a will, Ontario.ca says the spouse or common-law partner has first priority, followed by close adult relatives. Applications go to the Superior Court of Justice in the county or district where the deceased lived at death.

The estate itself pays the tax, not the trustee personally. Ontario.ca says the tax is paid as a deposit when you file the court application unless no tax is owed or the court orders a deferral. Acceptable payments are a certified cheque, a lawyer's or firm's trust account cheque, a trust company account cheque or a bank draft payable to the Minister of Finance.

After the certificate is issued, the estate representative must file an Estate Information Return with the Ministry of Finance listing the values of the deceased's assets. It is due within 180 calendar days of the certificate being issued, and it can be filed online, by mail, courier, fax or in person. For estates of $50,000 or less the return is still required. The province states that failing to file, or making false statements, carries a fine of at least $1,000 and up to twice the tax owed, and possibly up to two years in prison.

How the value of an estate is worked out

Ontario.ca lists what counts and what does not.

Included in the value:

• Ontario real estate, minus encumbrances such as mortgages and liens.
• Bank accounts, investments and vehicles.
• Property held in another person's name for the deceased.
• Insurance proceeds left to the estate.

Not included:

• Property the deceased did not own at death.
• Assets owned jointly.
• Real estate outside Ontario.
• The CPP death benefit, and RRSPs and TFSAs that have a beneficiary designation.

Some costs cannot reduce the value. Ontario.ca lists funeral expenses, legal fees, loans, credit card debts and real estate commissions as ineligible deductions. That means selling costs and the estate's other bills do not lower the tax base, although they will still reduce what is left to distribute.

How a house is counted

A house the deceased owned alone in Ontario is real estate in the estate, valued net of mortgages and liens. A home the deceased owned jointly with someone else is described on Ontario.ca as an excluded joint asset. Whether a property was held jointly in the way that counts, and what that means for the transfer, is a legal question about the title. Ask your lawyer to check the title and how it was held before you assume which way it falls.

Here is a simple illustration, using made-up numbers. If an estate's net value after mortgages is $600,000, the portion over $50,000 is $550,000, which is 550 blocks of $1,000. At $15 each, the tax would be $8,250. This only shows the arithmetic. Your lawyer works out the value, which must include everything on the lists above.

Selling an estate home: how the tax fits in

The timing is the practical issue. Ontario.ca says that if the deceased's real property must be sold, a Certificate of Appointment of Estate Trustee or a Small Estate Certificate should be obtained before anyone enters into an agreement of purchase and sale. So the sequence to ask your lawyer about is: speak to a lawyer, apply for the certificate and pay the tax, then list or accept an offer.

Preparation can overlap with that wait. Clearing out the contents, getting repairs done and gathering the documents for the sale do not need the certificate. The helping a parent sell their home guide covers who does what, preparing an older home for sale covers the work and clearing out your home deals with the contents.

Because the tax is charged when the certificate is applied for, ask your lawyer how the house should be valued for the application and for the Estate Information Return.

The seller of an estate home pays no land transfer tax, because in Ontario the buyer pays it. See land transfer tax in Ontario. For what a seller must say about the property, read seller disclosure in Ontario and ask your lawyer how it applies when the seller is an estate trustee.

What the estate trustee does besides the tax

Ontario.ca describes the estate trustee's job as winding up the deceased's affairs: paying taxes, bills and debts, collecting the assets and distributing what remains. A person named as estate trustee in a will is not required to act. If you are asked to take the role, you can speak to a lawyer before you decide, because the role carries duties and, as noted above, penalties for missed filings.

A power of attorney ends at death, according to the province, and the estate trustee takes over from that point. That matters for a home sale because someone who managed a parent's affairs under a power of attorney no longer has authority to sign for the property after death. The estate certificate is what gives the trustee that authority.

The tax is one of several costs of winding up an estate. Others include legal fees, the cost of keeping the house insured and maintained while it waits for sale, and the final income tax return. None of those, apart from mortgages and liens on the property, reduces the value used for the estate administration tax, but they all reduce what is left. Setting them out early gives the family a realistic picture before a house is listed.

A short checklist for an estate with a house

• Speak to an Ontario estate lawyer and ask whether a certificate is needed and which type.
• Have the lawyer confirm how title to the house was held and the amount of any mortgage.
• List the estate's assets and their values on the date of death.
• Apply to the Superior Court of Justice and pay the tax as a deposit if it is owed.
• Sign no agreement of purchase and sale until you have the certificate, or have your lawyer's written advice.
• File the Estate Information Return within 180 calendar days of the certificate.
• File the final tax return and designate the home as a principal residence if it qualifies.

Where to get help and plan the numbers

The Law Society Referral Service offers a free consultation of up to 30 minutes with a lawyer or licensed paralegal, and you can start at findlegalhelp.ca. For the money side, the net proceeds calculator and estimating net proceeds help you set out what a sale may leave, and costs and money lists the other items. More groups are on the resources page. If you want to talk, contact us.