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Estates & Wills & Trusts

Audits on the rise for Estate Information Returns

Executors must take care to accurately complete their Estate Information Return (EIR) as the province steps up its compliance efforts, Toronto wills and estates lawyer Daniel Bernstein tells AdvocateDaily.com.

Since 2015, executors have been required to file an EIR with Ontario’s Ministry of Finance disclosing a comprehensive list of information about the deceased person.

Prior to that, explains Bernstein, a lawyer with Weltman Bernstein, the provincial attorney general’s office essentially took executors at their word when declaring the value of an estate for the purposes of probate fees, also known as the Estate Administration Tax.

“It was basically an honour system. You would sign an affidavit stating that the estate was worth X amount, and then you would submit your cheque to the Ministry of the Attorney General for the tax owing based on that number,” he says.

However, since taking over responsibility, the finance ministry now requires the EIR to include a complete list of the assets used to determine the value of the estate and retains the right to audit submissions, says Bernstein, who adds that checks are on the rise.

“With the power of audit, you have to be very careful,” he says. “What they’re looking for are items of major value slipping through cracks.”

Bernstein says many people don't realize that personal items like jewelry and even items like clothes and furniture (if they have some intrinsic value), must be included on the EIR, as well as the value of any bank accounts, stocks, cash, bonds, motor vehicles and business interests held by the person at the time of their death.

“If the deceased owned a Rolex, diamond earrings, or any art, these items need to be included,” he says. "You will have to get an appraisal done if you don’t have any idea what something is worth.”  

Real estate held by the deceased should also go into the document, including information about the address, fair market value, and any encumbrances, although Bernstein adds that the value of any mortgages can be deducted for the purposes of the estate’s valuation.

Estate trustees must file an EIR within 90 days of receiving their certificate of appointment, even if the estate is not eligible for the Estate Administration Tax. The law allows for a fine of up to $1,000 for failure to submit on time. The ministry then has four years to request an audit.

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