Ontario government wants estate tax paid sooner

Ontario government wants estate tax sooner, but critics say it puts pressure on people at what is already a difficult time

Thestar.com
Sept. 24, 2015
By Richard J. Brennan

Taxes wait for no man - dead or alive, according to the Ontario government.

Many people are just waking up to the fact that a change in this year’s provincial budget, effective Jan. 1, requires executors to file estate information to the province within 90 days for tax purposes or face a fine and/or two years in jail.

“What they have done is speeded up the collection of that tax - that’s the issue,” Kitchener lawyer Greg Hertzberger, of the law firm of Cohen Highley, told the Star, adding there was no time limit before for filing an estate’s worth.

The Liberal government says the problem is that some estate representatives have not been filing this information and as a result the province hasn’t been getting its share of the estate tax, which generated $143 million in 2013-14.

“The regulation ensures that the government has the information needed to perform the audits and verify that the correct amounts of the tax have been paid,” Finance Minister Charles Sousa told the legislature.
Ontario has the highest estate taxes in the country, according to a comparison compiled by Ernst & Young LLP.

Critics say this “tax grab” puts undue pressure on executors - often family members - faced with balancing their grief with trying to make the Finance Ministry happy.

“It is the harshest tax because families are still grieving over the death of a loved one and then they have to turn around under the new changes ... and fill out paper work and send it directly to the Ministry of Finance with a list of assets. And what is extremely punishing about this is if they make a mistake they could face a fine and possibly jail time,” Progressive Conservative MPP Monte McNaughton (Lambton-Kent-Middlesex) told the Star.

The Estate Administration Tax (EAT), introduced in 1998 under former premier Mike Harris’s Conservatives, is payable on the value of a deceased person’s estate when a certificate of appointment of estate trustee is issued by a court.

Meanwhile, MPPs are hearing from constituents about the additional responsibility being foisted on family members who agree to be an executor.

“What this does is place just an added burden on people who have already got a lot on the plate when somebody they love has died,” said Toronto estate lawyer Andrew Rogerson.

New Democrat MPP Catherine Fife (Kitchener-Waterloo) said the result will be to dissuade people from being executors of a will. There is so much else going on from grief to dealing with lawyers. What this measure has done is increase the pressure (on executors),” she said.

The Liberal government has been scrambling to downplay the change, insisting the 90-day provision is not that onerous.

“There is no time limit for applying for an estate certificate, in fact, there is no legislated requirement to apply for an estate certificate. The regulation does not change the court process nor does it change the amount of tax owed by an estate,” a statement from the Ministry of Finance insisted.

McNaughton had a private member’s bill before the legislature that would have eliminated the time requirement, capped the province’s estate administration tax at $3,250, and excluded charitable bequests from the value of an estate.

However, the bill was defeated on second reading Thursday.

“I think this is the harshest tax grab in Ontario. The government has collected a lifetime of taxes,” McNaughton said.

The administration tax is calculated on the total value of the estate. On an estate valued at $240,000 the total tax would be $3,100. The current tax rate is $5 per thousand for the first $50,000, and $15 for each $1,000 after that.

Toronto estate lawyer Joseph Gyverson, Rogerson Law Group, explained the 90-day deadline takes effect after an estate has been probated and a certificate is issued by the court appointing an executor.

“If the trustee doesn’t file within the 90 days then the Sword of Damocles is looming over them because at any point the Ministry of Finance could impose minimum fine of $1,000 or a period of incarceration of up to two years,” Gyverson said.

“So it appears to be a revenue-generating process from the government’s standpoint. The whole motivation behind the reporting is to ensure that people are paying the proper amount of tax in the first instance,” he said.

Like all taxes, EAT revenue generated will go into general provincial coffers.