last will and testament waiting to be filled and signed

Managing a loved one’s affairs after he or she dies is never easy. However, a pending change in Ontario’s estate legislation could reduce a small part of the financial burden for some of your clients.

As of Jan. 1, 2020, estates valued at less than $50,000 will no longer have to pay probate fees in Ontario. As well, estate administrators will have twice the amount of time to file or amend the estate information returns, easing the pressure of meeting these administrative requirements on time.

The changes were announced in the 2019 Ontario budget in April. The goal of the revisions is to help “families with limited financial resources who may not be able to afford professional advice and assistance in complying with the Estate Administration Tax Act, 1998.”

This is “most welcome news” for smaller estates, says Keith Masterman, vice president of tax, retirement and estate planning with CI Investments Inc. in Toronto. He is “optimistic about the government’s plan to explore other options to provide relief and make the process less bureaucratic.”

However, Peter Merrick, income and capital enhancement consultant with Toronto-based, contends that “for anyone who owns property, the $50,000 threshold is negligible.” The overall savings also are small, he says, relative to what a larger estate may end up paying in probate fees.

Currently, probate fees in Ontario are $5 for each $1,000 or part thereof of the first $50,000 of the value of the estate, and $15 for each $1,000 or part thereof of the value of the estate that exceeds $50,000. The change in the legislation therefore will result in savings of up to $250 for all estates.

The budget document estimates that in 2020, there will be 30,000 taxable estates in Ontario, with about 2,500 of them exempt from paying any probate fees. The budget also estimates that fees will drop by an average of about 20% for estates that will be required to pay probate fees.

Nonetheless, people are always looking for ways to reduce or avoid paying those fees, Merrick says. People typically use strategies such as trusts and gifting assets before death to avoid those fees.

But you have to “look at tools to avoid probate fees with a jaundiced eye,” says Masterman. “All the tools available usually involve giving up control of your assets in one way or the other.”

Merrick suggests that “people are so focused on reducing probate fees, which are already relatively small, that they fail to look at the consequences – which are far greater.”

For example, a client may choose to gift assets while alive to reduce the value of their estate, but doing so may trigger capital gains taxes, which are much higher than probate fees.

More important, the client could be left with insufficient assets later in life when the need for those assents may be greater. “People overemphasize the impact of the 1.5% fee,” Masterman says.

The 2019 budget also extends the filing deadlines for both estate information returns and the correction of any errors on these returns.

Currently, an appointed executor (known in Ontario as the estate trustee) must file an estate information return with the Ontario Ministry of Finance.

The return must provide specific details about the assets held by the estate, such as: address, and assessment roll number and property identifier for real property; the account numbers, names and addresses of financial institutions for bank accounts; details of all securities, such as stocks and bonds, including account numbers and the name and address of the institution holding the securities; and the vehicle identification numbers, makes and models of all vehicles. These requirements were implemented in 2015.

The 2019 budget eases the administrative burden on executors and trustees by extending the filing deadline of the estate information return to 120 days from 90 days.

If a trustee made an error on the return, he or she will now have 60 days to file an amended return instead of 30 days. The budget documents state that these changes will “ease the compliance burden on families.”

Masterman agrees that more time to meet the filing requirements will provide relief for estate trustees and families.

Merrick adds that there is a huge backlog in the filing process, especially in urban areas, resulting in trustees choosing to file in rural areas, where there is usually less filing “traffic,” in order to meet the prevailing deadline.

“People would do almost anything to get through the current process,” Merrick says, adding that while an increase in the ministry’s staff may alleviate the backlog, extending the filing period could too.