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How is Ontario's estate tax calculated?

Ontario's estate administration tax -- commonly called the estate tax or probate tax -- is calculated based on the total value of the deceased's estate at the time of death. The assets to be valued include:

  • Bank accounts
  • Investments, such as stocks, bonds and options
  • Business interests
  • Intangible property
  • Vehicles and vessels
  • Any of the deceased's property that was held in someone else's name
  • Insurance, if "Estate" was named as the only beneficiary and the proceeds pass through the estate
  • Real estate in Ontario, less encumbrances (for example, a mortgage or other charge on the property)

Note: encumbrances on property other than real estate in Ontario cannot be deducted from the value of the estate.

The estate administration tax is payable by the estate and typically paid by the estate trustee or executor. Once the total value of the estate has been determined, calculation of the amount of tax payable is fairly straightforward:

  • $5 for each $1,000 of the first $50,000
  • $15 for each $1,000 that exceeds the first $50,000

Note, too, that the estate administration tax is a fee in addition to federal income taxes that may be payable by the estate. For example, if the deceased did not plan the estate in such as way as to roll over a Registered Retirement Savings Plan to a spouse, then those assets will lose tax-deferred status and trigger a tax liability.

There are tax strategies, however, for minimizing estate administration taxes and income taxes. If you have concerns about any of these matters, then don't hesitate to speak with an Ontario estate planning lawyer.

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