Every asset in an Ontario estate is valued as at the date of death, at fair market value, and the estate trustee swears to those figures. The same date produces two different answers for two different purposes: the Estate Administration Tax is charged on the value of the assets passing through the estate, with encumbrances on real property deductible, while income tax is charged on the gain, which is the fair market value less the adjusted cost base. An asset can therefore carry a large probate tax and no income tax, or the reverse. This article sets out how to value each class of asset, which assets are excluded from the estate value altogether, and what happens when the value has to be estimated.
Why Does the Same Asset Have Two Values?
The Estate Administration Tax is a value tax. It is charged at $15 per $1,000, or part of $1,000, above the $50,000 exemption, on the value of the estate assets, with the total rounded up to the nearest $1,000 before the calculation. What the deceased paid for an asset is irrelevant.
Income tax at death is a gain tax. The Income Tax Act treats the deceased as having disposed of each capital property at fair market value immediately before death, and one half of any resulting capital gain is taxable on the final return.
Consider a house worth $800,000 bought for $780,000 last year. For Estate Administration Tax it contributes $800,000 to the estate value. For income tax the gain is $20,000, of which $10,000 is taxable, and if it was the principal residence there may be no taxable gain at all.
Encumbrances on real property reduce the estate value; other debts do not. An encumbrance on the real estate, such as a mortgage, collateral mortgage or lien, is deducted from the value of that property where the property is included in the estate. Funeral expenses, legal fees, credit card debts, lines of credit, unregistered loans, loans and interest payments, vehicle debt and real estate commissions are not deductible. Our guide to the Estate Administration Tax works through the deductions in full, and there is a calculator on our homepage running on current rates.
How Is Each Class of Asset Valued?
| Asset | Basis of valuation | Practical note |
|---|---|---|
| Real property in Ontario | Appraised fair market value at the date of death, less encumbrances on it | A municipal assessment is prepared for property tax purposes and is not a date-of-death appraisal |
| Bank and investment accounts | Balance at the date of death | Request a date-of-death statement from each institution |
| Publicly traded securities | Market value at the date of death | Use the value on the date of death itself, not the date the executor gets access |
| Private company shares | Fair market value, generally by professional valuation | The most contested class in practice, and the one where a professional valuation generally earns its cost |
| Vehicles and boats | Fair market value | Guide values are a starting point; an appraisal is stronger for unusual or antique vehicles |
| Household and personal effects | Aggregate fair market value, not replacement cost | Ordinary contents are generally valued in the aggregate; items of real value are appraised individually |
| Jewellery, art, collections | Appraised fair market value | Appraise anything where the value is genuinely uncertain |
| Business interests | Fair market value of the interest | Partnership and shareholder agreements may fix or affect the value |
| Amounts owed to the deceased | Face value, adjusted for collectability | A loan to a family member that will never be repaid is not worth its face value |
| Foreign real property | Excluded from the Ontario estate value | Still relevant for income tax and for the foreign jurisdiction's own process |
Fair market value means what a willing buyer would pay a willing seller, both informed and neither compelled. It is not replacement cost, not insured value, and not what the family thinks something ought to fetch.
Value the estate as at the date of death even where access comes later. A market that moves between the death and the executor obtaining the certificate does not change the estate value, although it may change what the estate actually realises.
Which Assets Are Excluded From the Estate Value?
Assets passing outside the estate are not included in the Estate Administration Tax calculation:
Jointly held assets passing by survivorship, subject to the caution below
Registered plans and insurance with a valid beneficiary designation, where the designation causes the plan to pass outside the estate
Real property outside Ontario
The Canada Pension Plan death benefit
The registered plan exclusion needs qualifying. It applies where a valid designation causes the plan to pass outside the estate. A plan with no effective designation, or one payable to the estate, is included. The same logic applies to life insurance, and our guide to whether life insurance forms part of an estate explains when it does.
Survivorship is not the end of the inquiry. Where an asset was held jointly with an adult child, whether it truly passes outside the estate depends on what was intended, not on the form of the registration. Treating a joint account as excluded without considering that question can understate the estate.
Excluded from probate does not mean excluded from tax. A registered plan passing to a named beneficiary is outside the Estate Administration Tax calculation but its date-of-death value is generally included in income on the final return unless a qualifying rollover applies.
What If You Cannot Establish the Value in Time?
File on an estimate where a final value is genuinely unavailable. The Estate Administration Tax Act, 1998 allows the deposit to be based on the estimated value of the estate.
Give the required undertaking. Where the deposit is based on an estimate, the certificate will not issue until the applicant gives a signed undertaking to file a sworn statement of the actual total value, and pay any additional tax, within six months after giving the undertaking.
Complete the valuations promptly. The undertaking is enforceable and the court can make an order for compliance on the registrar's request.
File the Estate Information Return within 180 calendar days of the certificate being issued, with the Ministry of Finance rather than the Canada Revenue Agency. It requires a detailed list of assets with a description and value for each.
File an amended return within 60 days of discovering that information was incomplete or inaccurate.
Keep the supporting evidence for four years. Records have to be retained, and the Ministry may assess or reassess within four years of the tax becoming due, and at any time where information was never filed or was misrepresented.
Penalties are real. Failure to file the return, or filing a false or misleading one, carries a fine of at least $1,000 and up to twice the tax payable, and possible imprisonment for up to two years. Our guide to paying the Estate Administration Tax covers the payment mechanics.
Where This Goes Wrong
Using the municipal assessment for real property. Assessments are prepared on a different basis and on a different date. A date-of-death appraisal is the defensible figure, and where the tax rules use fair market value as the recipient's acquisition cost, it also supports that opening cost base.
Valuing contents at replacement cost. Insurance figures generally overstate what household goods are worth on the open market.
Guessing at private company shares. This is where reassessment risk concentrates, and where a professional valuation earns its cost.
Treating a joint account as automatically outside the estate. Whether it passes by survivorship depends on intention, and the answer affects both the estate value and who is entitled to the money.
Deducting debts that are not deductible. Encumbrances on real property, such as a mortgage, collateral mortgage or lien, reduce the estate value for this tax. Unregistered loans and lines of credit do not, and neither do credit cards, funeral costs, legal fees or real estate commissions. Executors regularly net those off and arrive at a figure that is too low.
Forgetting that valuation feeds three separate filings. The probate application, the Estate Information Return, and the deceased's final tax return all draw on the same valuation work, but they do not cover the same assets or treat them the same way. Assets outside probate can still matter for income tax, registered plans follow their own inclusion rules, and rollovers change tax values. Unexplained inconsistency between the filings is what draws attention.
Undervaluing to reduce the deposit. The estate trustee swears to the value, the Ministry can reassess, and the penalty provisions are substantial.
Valuation is the foundation everything else in the administration rests on, and it is worth getting right at the outset rather than correcting later. If you are unsure which assets belong in the calculation, you can book a free call.
Frequently Asked Questions
What date are estate assets valued at in Ontario?
The date of death. The two purposes are not identical, though: the Estate Administration Tax concerns the assets included in the taxable estate, while the income tax deemed disposition generally concerns capital property and is subject to rollovers and exemptions, with registered plans following separate rules again.
Do you need a professional appraisal for estate real property?
An appraisal as at the date of death is the defensible basis for the value. A municipal property assessment is prepared for property tax purposes on a different basis and different date, and it does not serve the same function. An appraisal is evidence of fair market value rather than a figure fixed against review, and where the tax rules use fair market value as the recipient's acquisition cost, it supports that opening cost base.
Are debts deducted when valuing an estate for probate tax?
Only encumbrances on real property included in the estate, such as a mortgage, collateral mortgage or lien. Funeral expenses, legal fees, credit card debts, lines of credit, unregistered loans, vehicle debt and real estate commissions are not deductible for this purpose, even though they are payable out of the estate.
Is a jointly owned home included in the estate value?
Where it genuinely passes by right of survivorship, it is excluded. Whether it does so depends on what the owners intended, which is a separate question from how title was registered, particularly where the joint owner is an adult child.
What if you cannot determine the value of an asset before filing?
The deposit can be based on an estimated value, but the certificate will not issue until the applicant gives a signed undertaking to file a sworn statement of the actual total value and pay any additional tax within six months after giving the undertaking. The Estate Information Return is then filed within 180 calendar days of the certificate being issued.
How long do you have to keep the valuation records?
Four years. The Ministry of Finance may assess or reassess within four years of the tax becoming due, and at any time where information was never filed or was misrepresented.
This article provides general information about Ontario law and is not legal advice. Speak with a lawyer about your specific circumstances.