When an executor/estate trustee applies for a Certificateof Appointment to collect and deal with certain propertyof a deceased (formerly and still commonly known as“probate”), estate administration tax is payable on thetotal value of the property that belonged to the deceasedat the time of death, subtracting the value of anyencumbrance of real property. This value must bedisclosed when an estate trustee applies to the SuperiorCourt of Justice for a Certificate of Appointment ofEstate Trustee, with or without a will, so that theMinister of Revenue may calculate the amount of theestate administration tax payable by the estate.

Duty to Give InformationSection 4.1 of the Estate Administration Tax Act(“EATA”) now provides for an estate trustee’s duty togive information to the Minister of Revenue. For anyestate certificate application made after January 1, 2013,the estate trustee must give the Minister of Revenuespecific information about the deceased and his or herassets for the Minister of Revenue to assess the estatewith respect to the tax payable under the EATA. The newinformation return must be submitted for any probateapplication made on or after January 1, 2015. Therefore,if you are an estate trustee that has made or is planningto make an application for a Certificate of Appointment

after this time, you now have a duty to file aninformation return with the Ministry of Finance andreport any inaccuracies that come to light thereafter.

Ontario Regulation 310/14 (“O.Reg. 310/14”), whichcame into effect on January 1, 2015, sets out the specificdetails that must be disclosed to the Minister of Revenue.An estate trustee must file an initial information returnwithin 90 calendar days of the Certificate ofAppointment being issued. In addition to informationabout the deceased and the application for the Certificateof Appointment, the information return will require:

• A complete list of assets of the deceased fordetermining the value of the estate, including thefollowing information with respect to each asset:

o The actual value of the asset, or if this isunavailable, the estimated value at the time of thedeceased’s death;

o For real property:

• The full address;

• The actual value of any encumbrances;

• The assessment roll number; and

• The property identifier.

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April 2015

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Wills, Estates & TrustsChanges to Estate Administration Tax Regime and Duties forEstate TrusteesIn our previous newsletter, we outlined key changes to the Ontario estate administration tax (commonly referredto as “probate tax”) regime. At that time, we reported on the legislative changes and were waiting on regulationswhich would set out the specific reporting requirements of estate trustees under the new system. Theseregulations, and the related Ministry of Finance forms and guidelines, were introduced on December 22, 2014.It is very important that estate trustees in Ontario take note of these changes as they impose new duties on anestate trustee to accurately report information about the deceased’s assets and update incorrect andincomplete information with the Ministry of Revenue. Failure to perform those duties may lead to payment ofhefty fines and even incarceration.

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o For cash assets (i.e. bank deposits, investmentcertificates, loan receivables, securities, contractsof insurance without a named beneficiary,derivatives, and partnership or investmentinterests):

• The type of asset;

• The number of units held at the time of death;

• Other particulars of the asset, such as theparticular series of bonds or class of shares;

• The name and contact information of thedeceased’s advisor, dealer, financial institutionor other person holding the asset on thedeceased’s behalf; and

• The account number in relation to the assetassigned by the person or institution holdingthe asset on the deceased’s behalf, if applicable;

o For assets other than real property and cash,detailed information about the asset, includingthe type of assets and other particulars;

o For any information owned by the deceased astenant-in-common, the asset and the percentageowned by the deceased person at the time ofdeath

• The amount of tax owing or paid by the estate orthe amount deposited;

• The name and contact information of every estatetrustee of the deceased’s estate;

• If the tax or deposit was calculated based on theestimated value of the estate, the date on which theestate trustee gave an undertaking to the court toconfirm the value of the estate and a copy of thatundertaking;

• If the Superior Court of Justice issued an estatecertificate without payment of the required deposit,the estate trustee must provide a copy of the orderobtained and any details about the securityfurnished to the Court;

• For any assets held by an advisor, dealer, financialinstitution or other person on behalf of thedeceased, the return may include the followinginformation: the name and contact information ofthe advisor, dealer, financial institution or otherperson who holds these assets, including anyaccount numbers and the total value of all the assetswithin each account.

Duty to Keep Records and Update andCorrect InformationThe Minister of Revenue makes clear in its guide tocompleting the information return that all estate trusteeswill be expected to retain supporting documents for theassets and values reported in the information return. Thenotion that estate trustees should have supportingdocumentation for the assets and values they report isnot new, but the assessment powers and 4 year period isnew and should encourage all estate trustees to take carein the values they report.

Along with the duty to file an initial information return,an estate trustee now has an additional duty required toupdate information in an amended information return ifhe or she becomes aware within four years of theissuance of Certificate of Appointment that theinformation in the initial information return wasinaccurate or incomplete. Again, the duty to report newor incorrect information relevant to the calculation ofprobate fees is not new, but the period and form of thereporting is. The refiling of the amended return mustinclude the updated information and the reason forupdating the return. This must be done no more than 30

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calendar days after the estate trustee becomes aware ofthe inaccuracy in the initial return. The only time anestate trustee need not file an amended return is where heor she discovers the incorrect or incomplete informationbeyond four years after the tax is due.

If an estate trustee comes across a statement disclosingdiscovered property of an estate, he or she has the dutyto give the Minister of Revenue a revised returncontaining the particulars of the after-discoveredproperty within 30 calendar days of the discovery.Similarly, where an estate trustee finds out that there isany incorrect or incomplete information in previous filedreturns, he or she must notify the Minister in writingwithin 30 calendar days after the discovery.

Penalties for Contravention of Section 4.1The EATA imposes onerous penalties for an estatetrustee who contravenes section 4.1 of the statute. Ifguilty, an estate trustee may have to pay a fine of at least$1,000 to up to twice the amount of the tax payable bythe estate if the amount is greater than $1,000, may beimprisoned for a term of up to two years, or both.

Impact of the New Rules on the ProbateProcessWhile the new amendments do not substantially changethe application process for a Certificate of Appointmentof Estate Trustee, with or without a Will, it is extremelyimportant that an estate trustee fully understands andacts upon the new duties imposed by the EATA andO.Reg. 310/14. Understanding these obligations,keeping detailed records and properly providing updatedinformation on the deceased’s assets is important toavoid liability. If you are an estate trustee in the processof applying for a Certificate of Appointment afterJanuary 1, 2015, you should review the particulars ofthese new duties and ensure that you comply with them

for at least four years from the date the Certificate ofAppointment is issued.

Impact of the New Rules on Estate PlanningThree common estate planning tools should beconsidered in light of the new reporting requirementsdescribed above, namely joint ownership, multiple willsand the use of alter ego and joint partner trusts.

Joint ownership is a common tool used by individuals tominimize probate fees and avoid the probate processaltogether in certain circumstances. This is usuallyaccomplished by adding children or others to accountsand real property as joint owners, thereby allowing titleto the accounts and real property to pass to the survivingowner without the need for a Certificate of Appointment.Regrettably, many individuals utilize this type ofplanning without considering other consequences suchas income tax liability and exposure to creditors andfamily law claims. Even more regrettable is that theplanning is not effective to remove the asset from theprobate fee calculation if the intention of the deceased isthat the surviving child treat the asset as part of the estateand share it with the other beneficiaries. The newreporting requirements reinforce this by distinguishingproperty held jointly with right of survivorship whichdoes pass to the survivor, and property that the deceasedand the estate has a beneficial interest in. In our opinion,estate trustees who also own property jointly with thedeceased will be required to report those jointly heldassets as part of the value of the estate if they intend todeal with the property as part of the estate.

On the other hand, the new reporting rules reinforce theuse of multiple wills as a valid tool to minimize probatefees. It does this by confirming that where a Certificateof Appointment is limited to assets administered under aparticular Will, only the assets administered by that Willshould be reported. Thankfully, the use of joint

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This article provides information of a general nature only and should not be relied upon as professional advice in any particular context. For more information about Wills, Estates & Trusts, contact a member of our Wills, Estates & Trusts Practice at905.273.3300.

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ownership and multiple wills can be combined toprovide clients with a relatively straightforward andseemingly secure way to minimize probate fees.

For clients that are over the age of 65 years and areinterested in minimizing the probate tax and potentiallyavoiding the entire process altogether, the use of AlterEgo Trusts and Joint Partner Trusts may be a goodoption. These types of trusts can maintain a significant

degree of flexibility and control for the client whilegiving them some assurance that they are leaving as littlework for their family as possible. The particulars ofthese trusts are beyond the scope of this newsletter, butour team is available if you have any questions.

If you require assistance with any of the above, themembers of our Wills, Estates and Trusts Group wouldbe pleased to assist you.

Pallett Valo LLP Wills, Estates & Trusts PracticeOur goal is to help our clients arrange their personal and business affairs in the most efficient andadvantageous manner possible.

We work closely with our clients and their other professional advisors to develop a customizedestate plan. We use vehicles like tax-planned trusts and wills to accomplish our client's personalobjectives while minimizing adverse tax consequences, including the reduction of probate taxes.We are experienced in the complex issues relating to business succession planning and ongoingwealth transfer. In this way, our clients are better prepared to deal with aging, illness, incapacityand death.

Upon incapacity or death, we represent and advise Estate Trustees, beneficiaries, heirs, survivingspouses and other family members. We have unique expertise advising families with disabledbeneficiaries. When disputes arise in the administration of an Estate, we provide experiencedcounsel to assist in their resolution, whether by litigation or other dispute resolution mechanisms.

Contact Members of the Wills, Estates & Trusts PracticeAnne Kennedy akennedy@pallettvalo.com Cecile Ko cko@pallettvalo.comDirect Dial: 905.273.3022 Ext. 204 Direct Dial: 905.273.3022 Ext. 213

Craig Ross cross@pallettvalo.com David Shlagbaum dshlagbaum@pallettvalo.comDirect Dial: 905.273.3022 Ext. 231 Direct Dial: 905.273.3022 Ext. 264

Lisa Sticht-Maksymec lsticht-maksymec@pallettvalo.comDirect Dial: 905.273.3022 Ext. 248

Cecile Ko is amember of thefirm’s Wills,Estates &Trusts Practice.