Ontario Estate Laws is a legal framework that assists and governs an individual’s personal assets and property management. If someone is a resident of Ontario, how can the property and assets of that person be managed, distributed, and disposed of after their death? The estate laws are a legal framework and instrument that ensures that a person’s last wishes are respected and carried out.
The New Estate Laws:
If you are from Ontario, you must know about the new laws pertaining to real estate that came effective from January 2023. Every individual, specifically belonging to Ontario, must be aware of the new laws. Here is the breakdown of the new policies, plus the important details necessary to understand.
Okay, the first section concerns the federal policies and the Non-Canadians Act (Foreign Buyer Ban). Following are the details of the federal policies:
- The federal government has now prohibited non-Canadians from property purchases. This rule will make housing and other schemes more accessible to Canadians. Even if you have been living in Canada for 2 years, you won’t be able to make a purchase.
- According to the new law, the definition of a residential property includes detached homes, buildings with three or fewer dwellings, semi-detached homes, and condo units.
- As per the new laws, if a non-Canadian prohibits or acts against the law, they can be fined up to $10,000. Moreover, if any person or entity (Canadian or non-Canadian) assists a non-Canadian in purchasing a property against the last will be fined the same.
- Certain exemptions, such as temporary residents working on getting permanent residency or international students, who can get property (cottages, lake houses, and homes in municipalities with a population of less than 10,000), are not subject to this ban. However, this ban does not apply to non-Canadians who want to rent a residential property. There are limitations to the exemptions as well.
- The ban on the list of exemptions was revised on March 27, 2023. As per the amendments, the ban does not apply to residential property purchased for development, vacancy land zoned for residential and mixed-use. Also, work permit holders (with 183 days remaining on their validity are also out of this ban)
Anti-Flipping Rules on Residential Real Estate:
- The profit margin obtained from selling a residential property, sold after the effectiveness of the new laws, subject to full taxation as it comes under business income (if the property was owned for less than 12 months)
- Under the new law, there is no such thing as Principal Residence Exemption (PRE); the entire profit will be taxed as 100% business income.
- The loss can no longer be claimed as a business loss if the owner loses money on the sale.
- There are exemptions to this rule as well (but they are not limited to death, divorce, separation, disability, or any major life event)
Underused Housing Tax:
- According to the new law, the housing tax is an annual 1% tax applicable on the ownership of vacant houses in Canada. However, this tax under the same cases will also be applied to non-resident, non-Canadian homeowners.
- A return must be filed by April 30, 2023; for each residential property owned in Canada if the individual is an affected residential property owner.
- Failure to file the return on a given timeline will be subjected to a minimum penalty of $5000-10000.
Vacant Home Tax (City Toronto):
- The (VHT) annual tax will be levied on vacant Toronto residences, payable from 2023. The purpose of the vacant home tax is to discourage owners from leaving their homes vacant. This rule will ease the low housing supply in the city.
- The property owner must declare the status of their residential property to the city of Toronto, regardless of whether the property is vacant or occupied.
- The property will be considered vacant if the owner fails to declare the occupancy status, hence must submit the tax.
- There are exemptions to the rule (but are not limited to) if a property is vacant due to the owner’s death or restoration.
- As per the new law, the VHT is 1% of the property’s current value assessment (CVA). Suppose the VHT equals $10,000 on a property with a CVA of $1,000,000. A fine of $250 will be fined if the applicant fails to submit their occupancy declaration. If the declaration is fake and breaks the VHT laws, the owner may face a fine of $10,000 for the violation.
- According to the new law, when buying or selling a property, the purchaser must ensure that the occupancy is declared and filed.
Vacant Unit Tax (City of Ottawa):
- The VUT law was approved in May 2022 but implemented in the 2023 taxation year. It is similar to other cities and is introduced to encourage the owners to maintain their homes to increase the city’s housing supply.
- The residential property owners must declare the occupancy status of the owned property annually.
- The owner must submit proof of occupancy when submitting a declaration.
- The residential property owner can also apply for a two-stage appeal process if they want to reassess the occupancy status.
- From 2023, the VUT is 1% of the property’s assessed value.
- If a property owner fails to declare the status by the given deadline, they will be fined $250 (applied to the final tax bill)
- If the declaration is fake and breaks the law, the owner may face a fine of $10,000 for the violation.
What are the key aspects of Ontario Estate Law?
Will is a legal document with all the information about an individual’s assets and property. How the property and assets will be distributed after their death, and it also allows the individuals to document their beneficiaries, and appoint executors. They can also outline the instructions on how to handle their affairs.
Ontario Estate Law is also involved in identifying and gathering assets of individuals. It also includes paying debts, and taxes and distributing the remaining property to beneficiaries according to the instructions of the wills. If there is no will, the rules of intestacy will be applied.
What is Probate? Probate is a legal process that validates a will. The estate or the executor will go through the probate process to verify the individual’s assets.
Ontario’s intestacy laws will navigate the process and how the asset will be distributed among the beneficiaries if a person dies without submitting a will.
Power to Attorney:
Power of attorney is a legal document that provides authority to the attorney to make financial or legal decisions on behalf of the grantor.
There is no separate estate tax in Ontario, but there are taxes that relate to the capital gains and income tax that directly apply to the estate.
If there are any disputes over the will or if there are any problematic DIY estate planning that lead to estate litigation in court.
Ontario Estate Law has been making massive changes in the Estate laws, effective January 1, 2023. The new year has introduced a number of regulations and laws. The laws also include higher payroll deductions for Canadian workers. However, all the laws are made to increase the housing supply and for the convenience of the residents of Canada.
Yes, under the new law, it is necessary to declare the occupancy status. However, there are exemptions to this law (if the homeowner dies or if the renovation is taking place). If not, then it is necessary to declare the occupancy status.
According to the new law, if a person or an entity assists a non-Canadian in purchasing a property against the new laws will be fined up to $10,000.
The exemptions are for refugees or individuals who have purchased residential property in Canada with their spouses or common-law partner (in case the partner is eligible to purchase the property in Canada)—temporary residents in Canada who come under the regulation, such as (international students and foreign workers.
Meet Doug, a seasoned financial planner with over 35 years of experience in providing trusted advice and planning for retirement, estates, income tax, and investments. As a Chartered Accountant (CPA CA), Certified Estate Advisor (CEA), Certified Financial Planner (CFP®), and Elder Planning Counsellor (EPC), Doug has the expertise and knowledge to guide and support executors through the estate processing journey.