If you live in Ontario, you have likely heard the rumor: “The government takes a cut when you die.” Technically, Canada does not have an inheritance tax. Your beneficiaries do not pay income tax on the money they inherit.
However, the Province of Ontario charges a fee to validate the Will and give the executor the authority to act. This is officially called the Estate Administration Tax (EAT), but most people know it simply as Probate Fees.
If you are an executor in Ontario in 2025, here is the math you need to know.
1. The “First $50,000” Exemption
The good news is that the Ontario government excludes small estates from this tax.
- The Rule: If the total value of the estate assets is $50,000 or less, the Probate Tax is $0.
- Note: You may still need to file paperwork, but you won’t write a cheque to the Minister of Finance.
2. The 1.5% Calculation
For any estate value over $50,000, the tax is calculated at 1.5% (or $15 for every $1,000).
The Formula: (Total Estate Value - $50,000) x 1.5% = Tax Payable
Real-World Example: Let’s say your parent passes away in Burlington with a total estate worth $500,000 (including a small condo and bank accounts).
- First $50,000: Tax is $0.
- Remaining $450,000: Taxed at 1.5%.
- Total Bill: You (the estate) must pay $6,750 to the Ontario government before the court will issue the “Certificate of Appointment of Estate Trustee.”
3. What Assets are “Taxable”?
This is where smart planning helps. The tax is only charged on assets that flow through the estate (i.e., assets that require the Will to unlock them).
- Subject to Tax: Real estate in Ontario (solely owned), bank accounts (solely owned), vehicles, non-registered investments, and business shares.
- NOT Subject to Tax:
- Jointly Owned Assets: A house owned largely by a couple as “Joint Tenants” usually passes automatically to the survivor. No probate.
- Named Beneficiaries: RRSPs, TFSAs, and Life Insurance policies with a specific person named as beneficiary (e.g., “To my son, Alex”) bypass the estate and the tax completely.
4. The Deadline is Strict
The Ontario government is aggressive about collecting this.
- The Deposit: You typically must pay the estimated tax when you submit the application to the court. You don’t get the certificate until the money is paid.
- The Information Return: Within 180 calendar days of receiving the certificate, you must file a detailed “Estate Information Return” with the Ministry of Finance. If you undervalued the estate (even accidentally), they can audit you and add penalties.
Summary
While 1.5% sounds small, on a typical Ontario home worth $1 million, that is a $14,250 bill that must be paid before the house can be sold. Understanding this “hidden tax” is the first step in ensuring your estate has enough liquid cash to cover it.
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