“I was flying up to meet with the real estate agent … and my phone rings. It was (the lawyer) and he says, ‘Oh by the way don’t forget to bring $27,965.’ I said, ‘for what?’
“He said ‘for the Ontario Estate Administration Tax,’” said Michael Bovaird, who lost his mother Judy to a brain tumour last February.
Bovaird, a resident of Florida, had to fly back and forth to his mother’s residence in New Hamburg. Shortly after her death he found out the impact of the new rules of the Ontario Estate Administration Tax (EAT).
Judy was, as Bovaird described it, the quintessential born-in-England, little old school lady.
“She was very intelligent but very soft spoken person; everybody loved my mom, she was a very likable friendly type of person,” he said.
She was diagnosed with a brain tumour in April 2011. In November 2013, Bovaird lost his father to a massive stroke. A year later, Judy was admitted to the emergency room in Waterloo and doctors were not optimistic about her health.
The doctors told Bovaird his mother would not be going home and he needed to make arrangements for hospice care. He lost her a few months later.
“I was actually standing at the door (in Florida) with my shoes on and suitcase when I got the call that she had just passed away,” he said.
What Bovaird didn’t know was a new EAT process had just come into effect Jan. 1, 2015.
The tax, which has existed in Ontario since 1998, was not as formal as it is now, explained estate lawyer Deryk Smith from Wolfe, Forester and Smith in Fergus.
“[In the past], perhaps we were more relaxed about valuing a car, a piece of property, real estate, jewelry, furnishings. Now we need to have written evaluations from people with credentials to confirm that as of the date of death this thing had a value of ‘x’ dollars,” said Smith.
The tax rate is $5 for each $1,000 of the first $50,000 of the estate and $15 for each $1,000 above $50,000.
The estate is the value of all assets including: real estate in Ontario, bank accounts, investments, vehicles and vessels, all property of the deceased which was held in another person’s name, goods, intangible property, business interests and insurance.
In the new rules, the EAT is collected after a representative or trustee applies for a Certificate of Appointment with the local court and files an Estate Information Return with the Ministry of Finance within 90 days.
The return must be detailed, outlining the value of all assets owned by the deceased on the date of death and accompanied by a description of the assets.
“The point of the legislation and regulation is to extract exact information from the trustee on the value of all the assets in the estate,” said Smith.
Failure to comply with the rules and timelines can result in a fine of at least $1,000 (and up to twice the tax payable by the estate) and/or imprisonment of up to two years.
While the monetary value of the tax did not change in 2015, the timeframe to file the return and what is included in the return has.
Bovaird and his lawyer had gone through the estate, creating a spreadsheet of everything his mother owned.
“When he asked me for this information, I didn’t think anything of it, I thought it would be for the probate,” he said.
Bovaird explained he could not access the estate to pay the tax.
“The government won’t probate the will until you’ve paid the estate tax, so they got you,” he added.
On the ministry of finance website, it explains, “the tax is paid as a deposit when the estate representative applies for a certificate of appointment.”
On top of the EAT, Bovaird also had to do his mother’s taxes for 2014.
“I had to come up with $28,000 for the (EAT) at the same exact time I had to come up with another $24,000 for my mom’s personal taxes – without touching her money,” he said.
However, law clerk Deanne Schnarr of Wolfe, Forester and Smith explained that would be an unusual case.
“There are a few things banks and financial institutions will allow you to pay from an estate without the certificate of appointment, without transferring everything over into an estate account,” Schnarr explained. “Funeral expenses are one of them, estate administration tax is another one.”
If the estate was wrapped up in property, then trustees can get an undertaking from the court to pay the tax once the property is sold, Schnarr added.
The ministry also states it has four years from the date of the return to reassess the assets, which Smith sees as an issue.
Smith explained there is a question about getting it all correct. Unlike income tax where an assessment letter is sent out, the ministry does not give out assessments for the EAT.
“Two years later, you get a letter in the mail saying, ‘we don’t agree with your numbers could you please provide evidence’… at that point the trustee could have distributed all the assets,” said Smith.
“If the trustee is somehow found to have made an error, he or she or they are personally responsible for payment of that tax.”
He added, “It’s not so much the amount needing to be paid … it’s the aggravation of not knowing if you’ve got it all right when you want to close out the estate.”
While the tax has been around for many years and the new rules came into effect a year ago, the tax has garnered some attention recently.
In September, Monte McNaughton, MPP for Lambton–Kent–Middlesex, introduced Bill 120, the Estate Administration Tax Fairness Act. The private member’s bill proposed a $3,250 cap for the EAT and provided an exemption for estates valued under $50,000.
It was defeated 41-9 in the Legislature.
New PC leader Patrick Brown used his first private member’s bill to try to abolish the EAT in November.
Brown’s bill, the Estate Administration Tax Abolition Act attempted to repeal the tax and also cap the probate fee at $180 in order to file the necessary court documents to administer the estate.
It too was defeated in the Legislature, by a 51-24 vote.
Wellington-Halton Hills MPP Ted Arnott supported both attempts at EAT reform.
“The government apparently is using this as a cash cow and taxing families on the estate of a deceased loved one at the most difficult times in their life and it seems grossly unfair to me,” said Arnott in an interview with the Advertiser.
Both bills would have eliminated the time frame of 90 days.
“People need more time to go through the documentation; Within a week or two after a family member or close friend has passed away you’re not in any mood to go through all the paper work. I think they should be giving people more time – at least six months to eight months in my opinion would be a more reasonable time frame,” said Arnott.
“We’re not prepared to let this go, we believe strongly it is not a fair situation.”
With the failure of both bills, the tax continues to haunt some who lost family members in 2015 – and it doesn’t seem to be going away any time soon.
“I was going back and forth, I never had time to grieve. I had to be focused, I had to be strong, I had to make sure everything was covered, I had to starting thinking about a plan to what do we do with all the stuff,” said Bovaird.
“This a tax on a tax, this is a tax on money that’s already been taxed. It’s unfair. My mom worked hard her whole life,” he added.
