in light of the changes to the EATA Rachel L. Blumenfeld, Partner Miller Thomson LLP Toronto Outline Brief background on probate fees and the EAT When and why is probate required 2011 Amendments and 2014 Regs to the EATA Estate Information Return Audits, assessments, offences and penalties Implications for estate administration Implications for estate planning 2
Probate when and why Confirms authority of Estate Trustee granted in the Will Provides third parties, transfer agents with comfort that they are dealing with the proper person Estate Trustee will need to probate a Will in order to be able to deal with and transfer certain assets Real estate, larger bank and investment accounts Process in Ontario: Application for Certificate of Appointment of Estate Trustee submitted to court Affidavit of Estate Trustee attesting to value Payment 3 Ontario Probate Fees 1992 significant increase in probate fees from 0.5% to 1.5% of assets over $50,000 1994 Re Eurig case brought SCC decision in 1998 probate fees are unconstitutional Estate Administration Tax Act, 1998 brought in Allows Ontario to impose the Estate Administration Tax ( EAT ) 4
Did your clients ask you about this? New Ontario Death Taxes - Please forward THIS IS NO JOKE! Check this out Have you heard about this? Here's a nice little tax (Estate Administration Tax) that the Wynne Liberals slipped through and no one is talking about it! It was effective Jan 1, 2015! 5 EATA Amendments 2011 amendments grants audit, inspection and assessment powers to Minister of Finance EAT still paid to the court, calculated the same way Requirement to provide prescribed information when obtaining a Certificate of Appointment Reg. 310/14 sets out requirements Estate Information Return ( EIR ) 6
Estate Information Return Fillable pdf form is at: http://www.forms.ssb.gov.on.ca/mbs/ssb/forms/ssbfor ms.nsf/getfileattach/9955e~1/$file/9955e.pdf Guide is at: http://www.forms.ssb.gov.on.ca/mbs/ssb/forms/ssbfor ms.nsf/getfileattach/9955e~2/$file/9955e_guide.pdf Other information, FAQs, on Ministry of Finance website 7 Filing Requirements for EIR - Who Estate Trustees who apply for and receive Certificate of Appointment Within 90 calendar days of issuance of Certificate EAT (still) paid to Court at time of application deposit on the tax On Resealing of Appointment (from another jurisdiction), Ancillary Appointment, Appointment of Foreign Executor s Nominee Not re: Certificate of Appointment of Succeeding ET Certificate of Appointment of Estate Trustee During Litigation Application completed prior to Jan. 1, 2015 Certificate not issued i.e., Secondary Will assets 8
Filing Requirements Amended EIR Within 30 days of payment of additional EAT or receipt of refund If initial EAT based on estimate of value of estate File undertaking to provide court with actual value File EIR based on undertaking Determine actual value and file with the court (and pay additional EAT) within 6 months of determination File subsequent EIR within 30 days of court filing If information of original EIR was incorrect or incomplete Amended EIR to be filed within 30 days of becoming aware 4-year limitation 9 Filing Requirements Amended EIR Subsequently discovered property Disclose to court and pay fee within 6 months of discovery Amended EIR due within 30 days of filing No limitation period 10
EIR Required Information Provide information only for assets referred to in the Will for which the Certificate issued Real estate in Ontario Full address, assessment roll no., PIN FMV, less mortgage Not necessarily MPAC Bank Accounts Name, address of FI Account number Investments Type and detail of instrument Name and address of broker Cars and boats VIN, HIN, make and model 11 Other Property Jewellery, household contents Can group together similar property Business interests Copyrights, TMs, patents Loans Insurance if estate was named as beneficiary Property in which deceased held beneficial interest Could include joint assets if falls into estate 12
Audits and Assessments Min of Finance now has audit powers and can impose penalties Has 4 years from date EAT became payable to assess or reassess the EAT Period remains open if Minister establishes failure to comply with requirements Notice of Assessment issued only if assessed Under Retail Sales Act No Clearance Certificate process, but Minister may write a comfort letter to the ET confirming no personal liability if distribute, once receive tax clearance 13 Offences and Penalties Failure to file return, making/assisting in making a false statement or omission Fine min of $1000, up to 2 x EAT payable Imprisonment of up to 2 years Due diligence defense Not guilty if the person did not know that the statement was false or misleading and in the exercise of reasonable diligence could not have known that statement or omission was false or misleading. (s. 5.1(3)) 14
Implications for Estate Administration Valuations Guide says: Estate representatives should be able to substantiate valuations. Use your best judgment and keep all records relevant to your valuation of the assets of the estate. Depending on the type of asset, valuation can be complicated, and a professional appraiser with expertise in a particular area may assist in obtaining a value. Keeping records 15 Implications for Estate Administration Who prepares the EIR? The accountant or the lawyer? Additional cost of administration Timing of distributions Holdback for 4 years? Indemnities Obtain tax clearance in order to obtain comfort letter? Ensure ET understands obligations and risks of noncompliance Including re requirements to amend the EIR Penalties for failure to comply 16
Implications for Estate Planning Importance of probate planning Financial, administrative and privacy Increasing use of Multiple Wills For personal property Use of flexible provision - carefully Bare trustee corporations for real estate Joint tenancies be careful Beneficiary designations AETs and JPTs New rules on taxation on death 17 in light of the changes to the EATA Rachel L. Blumenfeld, Partner Miller Thomson LLP 18