Ontario Estate Planning: Minimising Probate Tax Without Creating Bigger Problems

Two entirely different bills arrive when someone dies in Ontario, and confusing them leads people to optimise the small one while ignoring the large one.

Estate Administration Tax, still commonly called probate, is an Ontario tax on the value of the estate passing through the will. Income tax on the deemed disposition is a federal tax on everything the person owned, whether it goes through the will or not.

For most estates with a house, investments or a business, the second is substantially larger. Planning that fixates on the first can make the second worse.

What probate actually costs

Ontario’s Estate Administration Tax is charged on the value of estate assets passing under the will.

The first $50,000 is exempt outright. This has been the case since January 2020, and it is the detail most older commentary gets wrong: the previous two-tier structure charged a lower rate on the first $50,000 rather than exempting it. Above that threshold the tax is charged at a rate per $1,000 of value, set by the province. Confirm the current rate at Estate Administration Tax rather than working from a figure you remember.

An Estate Information Return must also be filed with the province within a set period after the estate certificate is issued. It is separate from the tax itself and carries its own penalties for late or inaccurate filing.

What is inside the estate, and what is not

This is the entire mechanism. Probate applies to assets that pass under the will.

That last row catches people. Naming your estate as the beneficiary of a registered plan pulls the entire value back into the probate calculation.

The methods, and what each actually costs you

Naming beneficiaries directly. The cheapest and safest step available. It takes an afternoon with your financial institution, it removes those assets from probate, and it has no downside beyond keeping the designations current after a marriage, divorce or death.

Do this first. Most people who think they need sophisticated planning need this instead.

Joint ownership with right of survivorship. Effective, and the method most often used badly.

Adding an adult child to your home or account removes the asset from probate. It also:

• Exposes the asset to that child’s creditors and to a claim on marriage breakdown
• Can trigger an immediate deemed disposition of the transferred share if the property is not your principal residence, creating tax now rather than later
• Creates a presumption of a resulting trust between a parent and an adult child, which means the survivor may hold the asset for the estate rather than keeping it, and the resulting dispute is exactly what the planning was meant to avoid
• Frequently amounts to a bare trust, with reporting consequences of its own. See bare trusts and T3 reporting

If you use joint ownership, document the intention in writing at the time. Whether the survivor takes beneficially or holds for the estate is a question of intention, and a signed note is worth more than any argument made afterwards.

Trusts. An alter ego trust (65 or older) or a joint partner trust holds the assets outside the estate, and allows a transfer in without triggering an immediate disposition. Real setup and annual costs, and worth it where the estate is substantial or a will challenge is plausible. Covered in alter ego and joint partner trusts.

Multiple wills. A well-established Ontario technique. A primary will covers assets requiring an estate certificate; a secondary will covers assets that do not, typically private company shares. Only the primary will is submitted for probate. For a business owner this is frequently the single largest saving available, and it requires a lawyer to draft properly.

Gifting during life. Removes the asset entirely. It also gives up control permanently and may trigger a disposition at fair market value. The attribution rules can pull the income back to you anyway. See the attribution rules.

The bill people forget

On death you are deemed to have disposed of your capital property at fair market value, and the accrued gain is reported in the final return at the inclusion rate in force. The current rate is one-half: the proposed increase to two-thirds was deferred in January 2025 and then cancelled in March 2025. Any planning memo still quoting two-thirds predates that reversal and should be re-modelled before anyone acts on it.

There is no inheritance tax in Canada and no estate tax. The tax is on the deemed disposition, and it is paid by the estate before anything is distributed. The CRA sets out the whole sequence under what to do when someone has died.

Two large reliefs:

• A spousal rollover. Property passing to a spouse, common-law partner or a qualifying spousal trust generally transfers at the deceased’s adjusted cost base rather than at fair market value, so the gain reported on death is nil and the tax is deferred until the survivor dies. This is why the bill on a first death is often small and the bill on the second is not. The conditions are set out under transfers of capital property, and the estate’s representative can elect out of the rollover property by property where using up the deceased’s losses or credits produces a better overall result
• The principal residence exemption, which can shelter the gain on a home entirely. See the principal residence exemption

Registered plans are the sharp edge. Where an RRSP has not matured, the deceased is treated as having received the full fair market value of the plan immediately before death, and that amount goes into income on the final return. A RRIF works the same way. On a large plan that single inclusion can push the final return into the top bracket by itself. The reduction depends entirely on who receives the money: a spouse, common-law partner, or financially dependent child or grandchild is a qualifying survivor, and nobody else is. See amounts paid from an RRSP or RRIF on the death of an annuitant.

A TFSA is different: the value at the date of death is not taxable. Naming a spouse or common-law partner as successor holder rather than as beneficiary keeps the account alive as their TFSA, so even the post-death growth stays sheltered and none of it consumes their own contribution room. A beneficiary designation does not achieve that. The distinction is set out at if a TFSA holder dies, and it is a five-minute form at the bank that most people have never filled in.

Deadlines that are not the ones you expect

The November and December rule catches executors who assume 30 April applies to every death. It does not, and the CRA states it plainly under the final return. Where the deceased or their spouse carried on a business, the filing date shifts again, though any balance owing is still due on the ordinary date. The duties that come with all of this are covered in an Ontario executor’s duties, and the graduated rates available to an estate in its first 36 months in the graduated rate estate.

The order to work in

1. Name beneficiaries on every registered plan and insurance policy
   └─ free, immediate, no downside. Do this before anything else.

2. Is there a private corporation?
   ├─ YES ──> multiple wills. Usually the largest single saving.
   └─ NO
      │
3.    Is there a large accrued gain outside the principal residence?
      ├─ YES ──> model the deemed disposition FIRST. It is probably
      │          bigger than the probate tax you are trying to avoid.
      └─ NO
         │
4.       Is the estate substantial, or a challenge plausible?
         ├─ YES ──> consider an alter ego or joint partner trust.
         └─ NO ───> a clear will plus beneficiary designations is
                    likely sufficient. Stop here.

Joint ownership is deliberately absent from that list. It is available, it works, and it should be a considered decision rather than a default.

The mistake worth naming

Adding a child to the title of a home to save probate, on a property that is not the child’s principal residence, can create a taxable gain on their share, expose the home to their creditors, and set up a dispute with their siblings. The probate saved is a fraction of one percent of the value. The problems created are not.

If you have an estate plan built around joint ownership, or a corporation with no secondary will, it is worth a review while changes are still straightforward to make.