“Estate Tax” Replaces Probate
A Toronto star article on Sep 24th, 2015 stated “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.”
Quite the headline – intended to attract attention, and I’m sure it did.
Mackenzie Investments has published a 3-page document, entitled “Ontario Executors Face New Probate Rules”. If you do an internet search on this title, you will locate the pdf document. It is written in understandable English and is quite good.
So here are the highlights:
- Name change only – The name has changed to “Estate Administration Tax”. Ontario has NOT introduced estate taxes, just renamed it’s probate fees and introduced other changes at the same time.
- Who does it affect? – If you need to “probate” a will (in other words, obtain “Letters Probate” or the new term “Certificate of Appointment of Estate Trustee With (or Without) a Will” – then these new rules affect you.
- What do you have to do? – Within 90 calendar days of receiving your “Certificate of Appointment …”, you must file an “Estate Information Return”. This return will provide details on how the estate’s value was determined.
- Do “probate fees” change? – NO. And, you still have to pay the estimated fees when you apply for the “Certificate” and the current rates are:
o 0.5% on the first $50,000 of the estate, and
o 1.5% on any amount above $50,000
o No probate is payable on amounts which are not included in the will.
New HST Elections for Closely Related Companies MUST be Filed by December 31st
CRA released a new election form, RC4616, in January 2015to replace form GST25. These forms permit members of a “qualifying group” to elect to have many transactions between the companies treated as made for no consideration, which means that no related HST payments would need to be made between the affected companies.
All new elections made starting January 1, 2015 must be filed with the CRA using the new form. Similarly, all elections that were in place prior to 2015 must now be filed with CRA by December 31, 2015, using the new form. If the new Election form is not filed by December 31st, any prior election will be considered invalid, which could lead to significant tax consequences in the event of an audit.
This Election can be filed electronically using the “File an Election” service in “My Business Account” or “Represent a Client” or can be mailed in to CRA.
If you have not taken advantage of this Election in the past, and think it might be useful to your companies, please contact either Allan or Marcia to assist you in making the decision.
New Rules for T3 Trust & Estate Returns effective January 1st, 2016
If you know of anyone who is dealing with the estate of a loved one, or has an trust for some other reason, please pass along this information to them.
Effective January 1st, 2016, testamentary trusts, estates and grandfathered inter vivos trusts located in Ontario will be taxable at a flat rate of approximately 42.16%. These trusts and estates will pay more taxes because they will no longer be subject to graduated tax rates. In addition, they:
- must have a calendar year-end
- must remit quarterly instalments
- cannot claim the $40,000 basic exemption when calculating alternative minimum tax, and
- will be subject to Part XII.2 tax on certain income.
Any effected trust/ estate that does not already have a calendar year-end, will be required to select a December 31 year-end, commencing with December 31, 2015. These trusts/ estates will have two year-ends in calendar 2015.
There will be 2 exceptions to this rule change:
- A “graduated rate estate” is a testamentary trust , for the first 36 months after the individual’s death. Such an estate will have to designate itself as a graduated rate estate to take advantage of the reduced tax rates. The estate will have an actual or deemed year-end immediately before it ceases to be a graduated rate estate.
- A “qualified disability trust” has a beneficiary who qualifies for the disability tax credit, and it will benefit for the graduated tax rates. In this case, the trust and beneficiary must jointly elect for the trust to be a qualified disability trust.
If you, or someone you know is dealing with this situation, please encourage them to give Marcia a call to ensure they meet the new requirements.
