Tax Implications

The process of applying for probate, or as it is now called, a "Certificate of Appointment of Estate Trustee", confirms the validity of a will and the appointment of the Estate Trustee. Estate administration taxes are based on the value of the estate and charged when the will of the deceased is submitted to the court for confirmation of the Estate Trustee appointment. There are certain assets which are excluded and not subject to estate administration tax. For example, real estate situated outside of Ontario and insurance proceeds or registered funds passing to a named beneficiary are not included when calculating the value of the assets for the purpose of estate administration tax.

Once appointed, one of the responsibilities of an Estate Trustee is to ensure that any income tax owed by the deceased person, at the time of death, is paid. The Estate Trustee must ensure that the final tax return of the deceased for the period between January 1 and the date of death is prepared. This final tax return reports any employment income, investment income and pension income, as well as income specific under the Income Tax Act for the submission of a final tax return.

The tax consequences upon death can be substantial if certain kinds of assets were held by the deceased at death. Good preparation of final tax returns and proper tax advice can result in significant income tax savings at death.

If you are contemplating making a will, you should consult an experienced estate lawyer to advise you. If you find yourself named as the Estate Trustee of someone who has passed away, good legal and accounting advice as soon as you become aware of your duties may save the estate unnecessary expenses.