Probate Tax Planning in Ontario: How to Minimize or Eliminate Estate Administration Tax
- Jason Berger
- Jun 18
- 4 min read
Updated: Jul 9
When it comes to estate planning in Ontario, many individuals are unaware of the significant benefits of probate tax planning—until it’s too late. A well-structured estate plan can save tens or even hundreds of thousands of dollars in probate (Estate Administration Tax) and ensure that your wealth transitions smoothly to your beneficiaries with minimal delay and expense.
In this article, we’ll explore why probate planning is important, how to avoid probate on various assets, and the tools available to completely “probate-proof” your estate, including alter ego trusts, joint partner trusts, bare trust corporations, and dual wills.
Why Probate Planning Matters
In Ontario, probate (Estate Administration Tax or EAT) is payable when a will is submitted to court for a Certificate of Appointment of Estate Trustee. Probate essentially validates the will and grants the executor authority to act.
As of 2025, Estate Administration Tax is calculated as:
$0 on the first $50,000 of estate value
$15 per $1,000 (or 1.5%) on the value exceeding $50,000
For example, a $2 million estate could result in over $29,000 in probate tax—money that could otherwise go to your heirs.
Aside from tax, probate triggers delays, court filing costs, and disclosure obligations, which can all be avoided or minimized with strategic planning.
The Goal: Probate-Proofing Your Estate
To fully probate-proof an estate means no part of the estate needs to go through the probate process, and therefore, no Estate Administration Tax is payable. While not every estate can be fully probate-proofed, most can be significantly minimized.
Here’s how to plan to avoid probate on different types of assets:
Registered Accounts with Named Beneficiaries
Assets like RRSPs, RRIFs, and TFSAs can pass directly to named beneficiaries (spouse, children, etc.) without going through probate. Ensure:
Beneficiary designations are current
The designation form has been properly filed with the financial institution
Life Insurance Policies
Like registered accounts, life insurance proceeds go directly to named beneficiaries and bypass the estate (and probate) entirely.
Joint Ownership with Right of Survivorship
For assets like bank accounts or real estate, joint ownership with a spouse (or sometimes children) can pass the asset outside the estate. However, this comes with risks and limitations:
Potential for litigation (especially with children or blended families)
Loss of control over the asset
Attribution rules for income tax
Capital gains tax on gifting ownership
Professional advice is crucial before adding someone as a joint owner.
Use of Trusts: Alter Ego and Joint Partner Trusts
For individuals aged 65 or older, inter vivos trusts offer powerful tools to avoid probate while maintaining control during your lifetime.
What Is an Alter Ego Trust?
An Alter Ego Trust is a trust created by someone aged 65 or older, where:
The settlor (you) is the sole beneficiary during your lifetime
The trust becomes the legal owner of assets
On your death, the trust terms govern distribution without going through your estate
A Joint Partner Trust is similar, but created jointly with a spouse or common-law partner.
Key Benefits:
Assets are removed from your estate, avoiding probate
You retain control over the assets during your lifetime
Continuity of management if you become incapacitated
Privacy, as the trust does not become part of the public record
Efficient administration after death
Criteria to Use:
You must be 65 years of age or older
Trust must be structured so that only you (or you and your spouse) benefit during your lifetime
Upon death, trust assets pass directly to beneficiaries under trust terms
Potential Drawback:
Trusts require some ongoing administration (i.e., they need to file a tax return, even where they do not earn income) and legal setup costs
Using Bare Trust Companies and Dual Wills
An advanced and flexible strategy involves combining bare trust planning with dual wills.
Bare Trusts and Holding Companies
A bare trust is a trust where the trustee has no discretion and acts solely on the beneficiary’s instructions. Commonly, a holding company is established to hold private assets, such as:
Private company shares
Investment accounts
Real estate
The beneficial owner (you) retains all control and income. Upon death, if structured properly:
Legal title remains with the bare trust
Beneficial interest passes under a secondary will, which is not subject to probate
Dual Wills in Ontario
Ontario courts recognize the use of multiple wills, where:
Primary will govern assets requiring probate (e.g., publicly traded securities, real estate without joint ownership)
Secondary will govern assets not requiring probate, such as:
Private corporation shares
Personal effects
Assets held via bare trusts
When executed correctly, only the primary will is submitted for probate, and only the assets under that will are taxed.
Key Advantages:
Substantial probate tax savings
Private business continuity – shares can be transferred without delay
No need to probate assets that are legally owned by a trustee (bare trust)
Caution:
Must be carefully drafted to ensure no overlap between wills
Assets must be clearly and consistently categorized
Final Thoughts
Every estate is unique, but with careful planning, most Ontario residents can significantly reduce or eliminate probate tax. Effective strategies may involve:
Naming beneficiaries on registered plans and insurance
Joint ownership (with caution)
Creating an Alter Ego or Joint Partner Trust (for those 65+)
Using a bare trust company structure
Drafting dual wills to segregate probate and non-probate assets
The best results come from a coordinated strategy that considers legal, tax, and family dynamics. If you’re interested in preserving more of your wealth for your loved ones and reducing the time, cost, and complexity of estate administration, now is the time to act.
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