NEW PROBATE RULES CAME INTO EFFECT JANUARY 1, 2015. Are You Familiar with these new Regulations?

NEW PROBATE RULES CAME INTO EFFECT JANUARY 1, 2015.

Are You Familiar with these new Regulations?
Jason P. Mallory, H.B.A., J.D.

NEW PROBATE RULES   

By now you may have heard about the new probate rule changes that came into effect on January 1, 2015. If you aren’t yet aware of these rule changes, you aren’t alone. At my recent estate planning seminars there were hundreds in attendance who were not yet familiar with these new regulations.

For this article, when I refer to “probate” I am referring to a Certificate of Appointment of Estate Trustee, or the process of obtaining the certificate from Court. When I refer to “probate tax” I am referring to Estate Administration Tax. In Ontario, probate tax is $5 per $1,000 on the first $50,000, and $15 per $1,000 on the value of the deceased’s assets exceeding $50,000. It is important to note that the rate of probate tax has not changed with these new probate rules.

These new rules are set out in regulations to the Estate Administration Tax Act, Ontario, and apply only to new probate applications after January 1, 2015. If a probate application was submitted or a probate certificate was obtained prior to this date, these new rules do not apply.

NEW DISCLOSURES REQUIRED 

Prior to these new rules, probate applications only disclosed the total amount of Real Property and Personal Property (i.e. bank accounts, investments, automobiles, personal belongings). A detailed break-down of particular assets was not previously required.

The new rules require a detailed list of the deceased’s assets and their values as at date of death in the “Estate Information Return” (I will refer to this as “the new form”). The categories of assets required to be disclosed in the new form include: real estate in Ontario, bank accounts, investments, vehicles and vessels, and other property (i.e. personal belongings).

AUDIT POWERS   

Prior to the new rules, the Ministry of Finance did not have audit and verification powers regarding asset disclosure for probate tax purposes. The new rules give the Ministry the right to audit an Estate Information Return and verify the accuracy of the information and disclosures made by Estate Trustees for a period of 4 years following the issuance of the probate certificate. The Ministry can extend this 4-year period if there has been a failure to comply with the rules, or any misrepresentation, willful default, or fraud by an Estate Trustee.

This timeline may be worrisome for Estate Trustees wishing to wind-up the administration of an estate quicker than the 4-year audit period. Certain steps can be taken with the Ministry of Finance, and other protections can be obtained from beneficiaries if an Estate Trustee wishes to complete the estate within the 4-year audit period. A lawyer experienced in estate administration will provide valuable advice in this situation.

It will be of utmost importance for Estate Trustees to keep detailed information, records, and accounts, at least for the duration of the audit period. It is also important to obtain valuations, appraisals, and reports to support the value of assets disclosed in the new form in the event that the Ministry does audit the estate.

DEADLINES

The new form must be submitted to the Ministry of Finance within 90 days of issuance of the probate certificate. If information contained in the initial form is later found to be incorrect, a corrected return is required to be submitted within 30 days of discovering the inaccuracy. There are also timelines within which additionally discovered assets must be disclosed.

PENALTIES

If an Estate Trustee fails to comply with the new rules, or provides false or misleading information, he or she may be found to be guilty of an offence. If an Estate Trustee is found to be guilty of an offence, he or she may be fined at least $1,000 and up to twice the amount of the probate tax payable by the estate. A severe breach of the rules may result in imprisonment of up to 2 years.

Needless to say it is very important to disclose all relevant information regarding a deceased’s assets to the Ministry of Finance, as well as to the lawyer assisting with the estate administration. It is also very important to seek guidance from your lawyer in interpreting these new rules and the Estate Information Return.

FREE INFORMATION SEMINAR

If these new rules seem a bit daunting, you are not alone. I will be discussing these new rules at my information seminar in November. There is no fee to attend, but space is limited and this event will fill-up fast. To reserve a seat, please call
519-676-5465 and ask about the “New Probate Rules seminar.”

Jason P. Mallory, H.B.A., J.D.

*The comments in this article are not meant as legal opinions and readers are cautioned not to act on information provided without seeking specific legal advice with respect to their particular situation.

kerr-wood-mallory-20-200x300[1]Jason P. Mallory
is a lawyer with Kerr Wood & Mallory in Blenheim and recipient of the Margaret E. Rintoul Award in Estate Planning

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