Are you curious about the Ontario estate laws? Whether you're young, old, new to Ontario, or have lived here for years, you need to know about Ontario estate law.
Understanding the ins and outs of estate law is imperative if you want to know exactly how to take care of your personal assets and how to protect your loved ones.
What Is Considered Your Estate in Canada?
Estate can include the following:
- Investments
- Real Estate
- Cash
- Businesses
- Bank accounts
- Possessions
- Other assets that an individual owns either fully or partially
In short, your estate is everything that you own at the time of your death.
There are two ways to transfer your assets to your loved ones:
- Stating who shall receive each asset at the time of your death through your Last Will and Testament, which you should make in compliance with Canadian law
- Defaulting to the Ontario Succession Law Reform Act, which will determine who receives the assets of someone who has passed away and has no Will
If you want to make sure that your property is distributed to the right people, you should create an official Last Will and Testament. This legally-binding document will protect your property and those people that you have listed to receive it upon your passing.
What Is the Ontario Estate Tax?
Luckily, there are no taxes on the inheritance of an estate.
Rather than having a tax, the Canada Revenue Agency (CRA) collects the taxes that the deceased owes to the government from their estate after they've passed. Then, they turn the estate over to the person that the testator identified in their Last Will and Testament. For those people who didn't create a Last Will and Testament, the government will abide by the Ontario Succession Law Reform Act (as mentioned earlier).
The CRA does not add any taxes onto the estate that they're transferring.
The executor of the Will is the person who should complete and submit a final tax return as of the day of the death. Once they file the tax return and the CRA collects their taxes, the executor will receive a Clearance Certificate. This document from the CRA indicates that the government received all of the individual's taxes.
If you do not receive a Clearance Certificate from the Canada Revenue Agency, you may be liable for the amount that the deceased person did not pay. However, you can avoid this if you have been legally designated as the beneficiary of registered assets. The writer of the Will may give this title to one of the following people related to him or her:
- The spouse
- The common-law partner
- The financially-dependent child
- The financially-dependent grandchild
You can read more about common-law marriage guidelines here.
What If the Deceased Doesn't Have a Beneficiary?
If the departed does not designate someone to receive their estate at the time of their death, the Canadian government assumes that there was a sale. This means that the government deals with the individual's property as if he/she sold all of his/her property right before his/her death.
To make this process fair, the government assumes that the person sold all of this property at fair market value during that time.
If the assets that the testator presumably sold grew in value since that person purchased them, the estate is also liable for capital gains tax during the year of the person's passing. In order to report this extra income, the executor of the deceased person's Will must include the capital gains as another income stream on the final tax return.
Once the government receives the necessary information regarding the departed person's income, they will calculate the required amount in taxes and charge the testator's estate the amount in question.
What Happens If the Deceased Doesn't Have a Will?
There are plenty of times in which a departed person never made a Will. They might have passed unexpectedly regardless of the average life expectancy or never thought about needing a Will. Either way, you're now stuck with an estate that doesn't have a legally-claimed administration.
The decision-making authority would then be passed to the courts.
Without a Will, there is no executor to the Will. This means that the government assumes control of the estate. No friend or family member can do anything legally with the departed person's estate without referring to the government's authority first.
If you find yourself in this position, there are a few things you can do.
1. Talk to a Professional About Ontario Estate Law
If you fear that the testator didn't leave a Will, you need to seek the expertise of an estate lawyer. They can help you sort out the confusion that an estate without a Will can cause.
Most notably, they can help you discuss the estate with family and friends who may all have a claim to the estate. The sooner you speak with a professional, the sooner the professional can diffuse any ongoing disagreements.
Estate law is too complicated to try to figure out on your own. It's likely that there are going to be laws and clauses that you're going to miss if you try to approach and fix the problem on your own. Plus, the average citizen isn't likely to get information about the estate from the courts.
Lawyers know how to collect accurate financial information and attribute it correctly. Plus, they can help you navigate confusion about the distribution of the estate once you've proven your worthiness to it.
2. Collect Proof Against the Existence of a Will
If you're going to claim that a deceased party doesn't have a Will, you need to prove that this is true. The courts aren't going to take your word for it.
This involves an extensive search. You need to show the courts that you've searched everywhere and haven't found any reference that a Will exists. Plus, you may need to contact the departed person's former lawyer and have them confirm that no Will was created or destroyed.
If the departed individual's lawyer shows evidence of a previously-existing Will, the court may accept a photocopy as the true Will. Even if that Will was destroyed, the court may accept this document over the preexisting thought that no Will at all existed.
3. Apply to Become the Estate Trustee Without a Will
If you're going to apply to become the estate trustee without a Will, you need to prove that you have a financial interest in the state of the Will. This means that you must be considered 'next of kin' or have been named on a prior Will.
If there is no Will, the estate trustee has to be an Ontario resident. Those who live outside of Ontario cannot become an estate trustee, even if they are next of kin or existed on a prior Will.
4. Understand the Intestate Rules
Ontario law declares that deceased parties who didn't create a valid Will 'intestate.' Once this happens, the Ontario government can then distribute the estate according to its laws. These are strict laws that apply to every intestate situation.
These rules are rarely flexible. However, an individual who was financially dependent on the departed party may have the opportunity to reverse Ontario's usual distribution rules.
If you think that you may be an exception to Ontario's rules, you should contact legal counsel who can help you navigate the laws surrounding intestate situations. You'll also likely need representation in legal proceedings as you'll have to navigate legal jargon that you likely don't have experience with.
What About Probate Fees?
With the income tax that the testator's estate must pay, there are also going to be probate fees. In Canada, probate fees differ by province.
Probate fees in Ontario are as follows:
- $5 for every $1,000 of assets, up to $50,000
- $15 for every $1,000 of assets, over $50,000
Depending on the size of the departed person's estate, this can add up fairly quickly.
Probate fees are also known as the estate administration tax. It covers the work that government officials have to do in ensuring that the estate is distributed as the deceased intended it.
The more estate there is to handle, the more work it takes. Therefore, the tax increases. That's why probate fees depend on the size of the estate.
Can I Reduce Probate Fees?
If you're worried about a large estate increasing probate fees too much, there are ways to bring those fees down.
Here are a few things that you can do now to decrease probate fees upon your death:
- Give gifts to people and organizations
- Designate a beneficiary on investment accounts
- Own property jointly
Should I Make a Last Will and Testament or an Estate Plan?
If you're living in Canada, you should definitely take the time to create a Last Will and Testament. Not only does this protect your assets if something were to happen to you, but it also protects your family members and other people who you may indicate to receive your property.
If you create a legal document that clearly lays out what you want others to have after you're gone, there's no way for people to fight over the assets. This also means that the government cannot seize any assets.
To make sure that you're creating a sound legal document for your estate, we highly recommend that you consult an expert. By working with a professional, you're also ensuring that you're abiding by Canadian law.
With the assistance of a lawyer, creating a Last Will and Testament will cost around $400.
Paying for a legal document that determines how to organize your estate may seem excessive, but it ultimately protects you and your family. If you want to make sure that your plan comes to fruition, you need to invest in solidified, legal documents.
If you have a large estate, there's no question about whether or not to invest in legal documents. Your estate is definitely worth more than any amount of time or money that you may put into organizing the documents necessary for the distribution of your estate.
When Should I Apply for Probate?
You may have heard of people applying for probate in Canada. However, this is not necessary for the administration of all estates. There are a few scenarios where someone may need to apply for probate:
- The individual did not have a Will
- The departed person's Will did not clearly name their estate trustee
- You need proof of your legal right to receive part of the deceased person's estate
- One or more of the estate is composed of real property
- There is a dispute over who the estate trustee is
- There is a dispute over whether or not the Will is valid
- A beneficiary or multiple beneficiaries on the Will are not able to provide legal consent
Keep in mind that the court can only hand out one of these probate certificates. So, you should make sure that no one else has started the application for the certificate. You can determine this by referring to the following sources:
- The estate trustee on the Will
- The estate trustee's lawyer
- Relatives of the testator
- Friends of the departed
- The courthouse in the city or province which the departed lived
Protect Your Family
According to Ontario estate law, you need to have a legal document in order for your determined executor to follow your Will through without extensive legal intervention.
By taking the time to draft legal documents, you'll be saving your family and friends time and money in the future. Plus, you're ensuring that your estate is going to go to the people whom you care for most.
Another great way to protect your loved ones in case of your passing is by investing in life insurance. Our team here at Insurdinary, make it easy to find a great life insurance plan. You can compare life insurance quotes and explore more about what investing in life insurance means for you and your family.
