How to Minimize Probate Tax in Ontario

Understanding Ontario Estate Administration Tax

Ontario charges Estate Administration Tax (EAT) — commonly called "probate tax" — when an executor applies to the court for a Certificate of Appointment of Estate Trustee. The tax is calculated at 1.5% of the estate value above $50,000. On a $1,000,000 estate, the tax is approximately $14,250. Strategic estate planning can significantly reduce or even eliminate this tax for many Ontarians.

Strategy 1: Name Beneficiaries Directly

Assets with named beneficiaries pass directly to those beneficiaries outside the estate, bypassing both probate and the estate administration tax. This applies to:

• RRSPs, RRIFs, and TFSAs with named beneficiaries (other than the estate)
• Life insurance policies with named beneficiaries (other than the estate)
• Pension plans and group benefits with named beneficiaries

Review and update your beneficiary designations regularly — especially after major life events (marriage, divorce, birth of children, death of a named beneficiary).

Strategy 2: Joint Ownership with Right of Survivorship

Assets held jointly with right of survivorship (JTWROS) pass automatically to the surviving joint owner upon death, without going through the estate. This is common for matrimonial homes and joint bank accounts. However, adding someone as a joint owner during your lifetime can trigger income tax implications (deemed disposition) and should be done carefully with tax and legal advice.

Strategy 3: Multiple Wills (Primary and Secondary)

Many Ontario residents with private company shares or other assets that do not require a probated will (because they can be transferred without a court certificate) can use a "secondary will" covering those assets. The secondary will is not probated, so the value of those assets is excluded from the EAT calculation. This strategy is particularly valuable for business owners with significant private company holdings.

Strategy 4: Gifts During Lifetime

Assets gifted during your lifetime are not part of your estate and are not subject to EAT. However, gifting assets during your lifetime can trigger capital gains tax (deemed disposition at fair market value), loss of income, and potential impact on government benefits. Always consult with a tax lawyer or accountant before making significant lifetime gifts.