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But Wait, There’s More: Canadian and Ontario Laws That Can Impact Estates and Trusts

In January of this year, my blog “New Year, New Estate Laws Are Here,” summarized the substantive changes to Ontario estate and trust law which came into effect on January 1, 2022. These changes were significant, and we expected significant litigation to go along with them.

So far, this abundance of litigation has not resulted in decided cases. One case considered the possibility of an outline of a will that was signed by the deceased and witnessed by two individuals being considered a will under the “substantial compliance” rule, but the reported decision is an interim one that did not decide the issue.

At present, then, I can’t give you any guidance on how these laws are likely to be applied. However, in the interest of giving you some new (or new to you) laws to worry about, here is a round-up of some laws which can have a significant impact on a Canadian or Ontario estate plan or estate administration.

Trust Reporting and Disclosure Rules

The Government of Canada has recently announced that the new reporting requirements (see my blog “New Trust Reporting and Disclosure Rules – Expect the Unexpected for 2022”) will now apply to any trust whose year-end is December 31, 2023, or later.

While this is another year’s delay, trustees should still be gearing up for compliance, and anyone who is a bare trustee (including it appears in-trust accounts over $50,000) needs to be aware that they must adhere to the new rules.

New Real Estate Taxes and Prohibitions for Non-Residents

The new vacant home tax applies to properties in the City of Toronto which are unoccupied or unrented to a tenant, with certain exceptions. All homeowners in Toronto will need to complete an online declaration regarding the vacant home tax before February 2, 2023.

The online declaration should be available in mid-December 2022: see https://www.toronto.ca/services-payments/property-taxes-utilities/vacant-home-tax/ for more information.

The Ontario non-resident speculation tax (NRST) is now levied at a rate of 25% on all residential property in any part of Ontario (prior to March 30, 2022, the rate was 15% and it applied only to certain geographical areas in Ontario) acquired by a non-resident individual or corporation or by a trustee on behalf of a non-resident individual or entity (as defined by the regulations, subject to certain exemptions). Canadian citizens are not considered non-residents for the purposes of the NRST.

If a property is acquired by several people, and one is a non-resident (and non-citizen) of Canada, the NRST will apply to the entire value of consideration paid for the property, and not just to the non-resident’s share.

The Prohibition on the Purchase of Residential Property by Non-Canadians Act (Canada) is a new Act that prohibits the purchase of Canadian residential property by non-Canadians, directly or indirectly, for a period of 2 years from January 1, 2023. Regulations to the Act are to be promulgated to clarify what constitutes a “purchase” and provide exemptions, but none have been forthcoming at this date.

The Underused Housing Tax Act (Canada) imposes a tax of 1% of the value of the property (prorated if there are multiple owners) on vacant or underused residential property in Canada at the federal level. Unfortunately, neither term is defined in the Act. Occupation of a property by a rent-paying tenant or by an arms’-length individual (as defined in the Income Tax Act (Canada)) with a written agreement appear to be sufficient for it not to apply. Speak to your tax advisor if you think your property may be subject to this Act.

Exporting Art, Collectibles and Other Objects Abroad

Although not new, if there are personal effects in an estate to be distributed to non-resident beneficiaries, the executor needs to be concerned about the Canadian Cultural Property Export and Import Act (Canada) and the Canadian Cultural Property Export Control List enacted pursuant to the Act.

This legislation provides that certain types of objects cannot be exported from Canada without a permit. The objects fall into eight groups (specific definitions are provided for different objects within each category):

GROUP I – Objects Recovered from the Soil or Waters of Canada

GROUP II – Objects of Ethnographic Material Culture

GROUP III – Military Objects

GROUP IV – Objects of Applied and Decorative Art

GROUP V – Objects of Fine Art

GROUP VI – Scientific or Technological Objects

GROUP VII – Textual Records, Graphic Records and Sound Recordings

GROUP VIII – Musical Instruments

Note that to fall within any definition on the list, an object must in general be 50 or more years old, have been made by a natural person who is no longer living, and have a fair market value in Canada above a certain amount (which varies depending on the definition for the object in question).

Many laws, both provincial and federal, affect both estate plans and the administration of estates. Certain types of assets and ownership structures can create more complexity for owners, executors and beneficiaries, and should be more carefully considered.

Professional advice can avoid the nasty surprise of running afoul of an unknown law that levies tax or penalties on the uncompliant.

— O’Sullivan Estate Lawyers

The comments offered in this article are meant to be general in nature, are limited to the law of Ontario, Canada, and are not intended to provide legal or tax advice on any individual situation. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate to your personal circumstances.