Dying in Ontario is Now More Complicated
Ontario enacted new regulations to the estate settlement process on January 1, 2015. What this means is that now there’s more red tape and delays settling an estate. It’s also more work and responsibility for the executor who implements the wishes of the testator.
What Major Changes Have Been Implemented
- Enhanced compliance by transferring administration of the fee from the Ministry of the Attorney General to the Ministry of Revenue/Finance.
Estate Trustees (executors), will face greater scrutiny and accountability with hefty consequences for knowingly fabricating information; fines range from $1,000 to double the EAT payable plus up to two years of incarceration. Tougher penalties will also increase the difficulty of defending innocent errors. EAT inspectors also have the authority to request information from any person, not just the estate trustee. In addition, the Ministry of revenue may assess or reassess for up to four years from the application for the certificate of appointment, with an unlimited time frame if the information return is not filed or, if it is filed and there is any indication of neglect, carelessness, willful default or fraud.
- Executors will be required to file an “Estate Information Return” with the Ministry of Finance within 90 calendar days after the Certificate of Appointment of Estate Trustee is issued by the government. That is, once the executor applies for and receives a Certificate of Appointment of Estate Trustee, the executor must submit a detailed Estate Information Return within 90 calendar days to provide details of how the estate’s value was determined. Failure to do so can result in a fine and/or imprisonment.
What Executors (Estate Trustees) Should Do
Find out if you are in fact, an executor. If you are, I would recommend getting a copy of the will and reviewing it. Is it fully clear to you what your testator wants done for their estate? If not, you should get professional advice. Being an executor is a very stressful role and should not be taken lightly. An executor might be flattered that the testator held you in such high regard, but this “honor” comes with heightened responsibility. Are you aware that you risk personal liability for any mistakes made?
What Testators Should Do
It has never been more important to have your affairs in order. Firstly, while it goes without saying, you should have a will. Discuss your wishes with your executor and make sure they know they know and understand the details of your will. Make it easier on everyone involved!
If you don’t have a will, it’s called dying intestate and the government has a whole other process for settling your estate. The bottom line is that you won’t have a say in how your estate is divided among your beneficiaries.
What I Have Done
As a certified financial planner, I find estate planning is complex as many people have unique situations. To better address the needs of clients in this regard, I recently completed the Certified Executor Advisor (CEA) program. As the title states, it focuses on helping executors better understand their role and responsibility when this duty comes into effect. It also highlights the areas I can better advise on strategies to consider (i.e. how to plan to pay less taxes and lower probate fees, just to name a few) while the testator is still alive.
- Take a proactive approach to estate planning whether you are the testator or an executor. You need to work together.
- Review the book, Estate Planning Through Family Meetings is worth reading.
- Consider working with a certified financial planner, CFP who has their Certified Executor Advisor, CEA, accreditation. The CFPs six-step financial planning framework combined with a CEAs training can be a blueprint for success.
I know it’s a tough topic for families to deal with but It’s never to late to start!
1: Implementation of the New Probate Rules in Ontario
For those unfamiliar with estate planning terminology, below are a few definitions.
- A testator is the person who has passed away i.e. the deceased.
- An estate trustee (executor) is the person named in the will, that looks after the final affairs of the deceased. This starts with overseeing the funeral and then following the legal process whereby an individual’s assets are distributed according to his/her wishes,
- Probate refers to a court procedure by which a will is proven to be valid or invalid.
- Estate Administration Tax (EAT) is more commonly known as the “probate fee”. This fee aka “tax” is 1.5% on the first $50,000 of an estate’s value and ½% on the balance. For example on a $1,000,000 estate, the EAT or probate fee works out to $14,500.
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