Acting as an estate trustee can be an onerous task.
Recent amendments to Ontario's Estate Administration Tax Act, likely effective January 1, 2013, will change the process for paying probate fees, and will both clarify and add to the obligations of estate trustees.
Most other Canadian provinces and territories have probate regimes requiring some level of valuation of assets. We can expect that most of these jurisdictions will also seek to maximize probate revenue over the years to come.
The amendments to the Ontario Act will have the following results:
- New filings will need to be made with the Ministry of Finance.
- Audit and assessment powers will be enhanced for four years from the date probate is obtained, or indefinitely if there has been neglect, carelessness or wilful default or fraud.
- There are criminal offence provisions for false or misleading statements, subject to a due diligence defence.
- Estate trustees will be required to keep records that "enable the accurate determination of tax payable."
- There will be no clearance certificate provision.
- Fees will be payable by estate trustees only in their representative capacity, which is intended to protect them from personal liability. However there remains potential exposure to trustees for their negligence, breach of trust, and the criminal offense sanctions noted above.
These changes highlight the increasingly onerous task of estate trustees and their advisors. Here are some brief statements of best practices for trustees to keep in mind in light of the new amendments:
- Assets should be valued carefully, and appraisals obtained where there is no other clear determination of fair market value.
- Good records must be kept to substantiate values.
- If actual values vary from estimates, filings and payments must be updated.
- Trustees should consider retaining holdbacks for longer periods.
- Testators might consider avoiding the probate process altogether through the use of such devices and structures as Joint Spousal Trusts, Alter Ego Trusts, direct designation of beneficiaries, multiple wills, and perhaps joint tenancies where appropriate.
Guy A. Desmarais, B. Com., LL.B., TEP, is a Tax Partner in the Sudbury-Nipissing office of Collins Barrow. Guy can be reached at gudesmarais@collinsbarrow.com.