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Understanding estate audit rules as an executor

On Behalf of | May 19, 2022 | Trustees, Executors & Fiduciaries

Executors have many duties on their plates, and they are expected to undertake them with acumen and honesty. Ideally, an executor in Ontario needs to have some financial savvy as well as some knowledge of the laws that govern estate planning. Occasionally, estate audits come into play, and provincial rules instituted in 2015 help to keep executors on the straight and narrow when it comes to the reporting of assets.

The reason for these audits

If the Ontario government suspects an executor has underreported the value of the estate, it can order an audit of the estate, which can be both time-consuming and costly. The Estate Information Return (EIR) was introduced by Ontario for this reason since some executors were purposely underreporting these values to significantly reduce the amount of probate tax owed. In the province, the required amount of probate tax is 1.5% applied to the value of an estate beyond $50,000.

Serious consequences for missteps

The Ontario Ministry of Finance must receive EIRs from executors within 180 days of filing a probate certificate. The province can also issue an audit of the estate up to four years after the filing of the probate certificate to reassess or assess an estate’s assets. If an executor does not file an EIR, files it late, or makes false or misleading claims, he or she could be fined $1,000 and ordered to pay up to twice the amount of probate tax originally required. He or she could also face time in prison for up to two years.

There are many instances where it could prove wise for Ontario executors to obtain a formal appraisal of assets. This could substantially lower the odds of facing a government audit of the estate. It may also be prudent to obtain legal advice for any questions and concerns specifically regarding EIRs or about the estate administration process in general.

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