Valuing an estate for probate used to be relatively simple in Ontario: executors entered the total value of the estate on the application for probate, signed an accompanying affidavit stating the valuation was correct, and that was it.

Not anymore!

As of January 1st, Ontario executors (known as estate trustees) must file an Estate Information Return detailing the valuation of specific assets in an estate, which affects both executors and testators. I enclose a link to the Ontario Ministry of Finance for a full description of the Estate Administration Tax (formerly known as Probate Fees).

The new rules were enacted because many in the estate planning industry suspected some executors were understating their estates’ values in some cases, significantly. There was a general feeling that people weren’t taking valuations too seriously or at least when assets weren’t too serious. For examples, executors may have forgotten about the ATV or tractor the deceased kept at the cottage up north. The government believed that they could place themselves in a better position to audit an estate if the need arose. Moreover, it saw this as an easy way to raise revenue that would not attract headlines.

The new regulations have added a legal cost to the process. It may encourage testators to do even more planning by moving more people out of the probate process using alter-ego trusts, joint ownership, named beneficiaries, and dual wills. Keep in mind certain strategies do require the assistance of a lawyer such as an alter-ego trust, Will, or dual will.

There has always been a financial argument (avoiding probate fees) for moving assets out of the estate before death. The additional paperwork and filing challenges strengthen those arguments. Not to mention you are not only avoiding the process but the potential liability itself.

For more information about methods to help reduce Estate Administration taxes please do not hesitate to contact me. If you feel someone you know may be interested in this information, do not hesitate to forward my note.