Selling an inherited home in Ontario, from probate to the proceeds

Before anything is listed, the estate needs a person with legal authority to sell. If the deceased owned the home with a spouse as joint tenants, title passes to the survivor by right of survivorship and the lawyer registers a survivorship application; no probate is needed for the house. If the home was in the deceased's name alone, or held as tenants in common, the estate trustee named in the will generally needs a Certificate of Appointment of Estate Trustee with a Will from the Superior Court of Justice before the Land Registry Office will accept a transfer. Where there is no will, a family member applies for a Certificate of Appointment of Estate Trustee without a Will, and the Succession Law Reform Act decides who inherits. Ontario's simplified small estate certificate is limited to estates under a value set by regulation, one hundred and fifty thousand dollars as of this writing, which rarely covers a house in Durham. One narrow exception exists: land converted from the Registry system to Land Titles that has not changed hands since conversion can sometimes be transferred by the trustee on the strength of the will alone, known as the first dealings exemption. Your lawyer reads the parcel register to see whether it applies.

The court charges Estate Administration Tax, which most people still call probate fees, when it issues the certificate. Since the start of 2020 the first fifty thousand dollars of an estate's value carries no tax, and each thousand dollars above that line, or any part of a thousand, costs fifteen dollars. The value of the estate includes the fair market value of Ontario real estate at the date of death, less any mortgage or other encumbrance registered against it, but not the deceased's other debts. A written opinion of value from a realtor or an appraisal as of the date of death supports the figure, and the same number becomes the estate's cost base for income tax later, so it is worth getting right rather than guessing low. The trustee then has 180 calendar days from the date on the certificate to send the Ministry of Finance an Estate Information Return that lists each asset and its value. An estimate used on the application gets corrected on that return, and an asset discovered later triggers an amended return inside 60 days. Missing the deadline is an offence, and the ministry can audit and reassess for four years after the tax was payable.

For income tax, a person is deemed to have sold everything they owned at fair market value immediately before death. On the deceased's final return the house is treated as sold at its date-of-death value. If it was their principal residence for every year they owned it, the principal residence exemption removes the gain, but only if the designation is actually made: since the 2016 tax year the disposition must be reported on Schedule 3 and the designation form completed even when no tax results. Years the deceased did not live there, a rental period or a second property up at Lake Scugog for example, leave a partly taxable gain on the final return. The estate then owns the house with a cost base equal to the date-of-death value. When the estate sells, any rise in value between death and closing is a capital gain of the estate, reported on a T3 trust return, and the selling costs, including remuneration, legal fees and repairs made to sell, reduce it. A drop in value produces a loss that the estate may be able to carry back to the final return if the sale closes within the first taxation year of a graduated rate estate. An accountant handles this, but the trustee must keep every invoice.

A house can be marketed before the certificate arrives, and in Durham it often is, because the court's processing time varies and heating an empty house through a winter costs money. What the trustee cannot do is close. The offer should name the seller as the estate trustee of the estate, and it should carry a condition, or a closing date long enough, to let the certificate issue, with a right to extend if the court is slow. Buyers' lawyers will ask for a notarial copy of the certificate, and title insurers will insist on it before a transfer registers. Everything else can proceed: the clean-out, the paint, the photographs, the pre-listing inspection that answers questions the trustee cannot. Two practical points. First, the trustee should not spend estate money on renovations without the beneficiaries' agreement in writing, since a trustee who improves a house and sells it for less than the cost can be asked to explain the difference. Second, the will may give the house to a beneficiary outright or grant someone a right of first refusal; read it with the lawyer before the sign goes up, because a sale that ignores a gift in the will is a problem no closing can fix.

Estate houses in Oshawa and Whitby tend to be older and original: a post-war storey-and-a-half near the hospital, a sixties bungalow in a mature subdivision, a century home with knob-and-tube wiring that was never replaced. Insurance is the first call. Most policies require notice once a home is vacant, often within thirty days, and some insurers will not carry a vacant property at all, so the trustee arranges a vacancy permit, keeps the heat on and has someone check the house regularly. A pre-listing inspection earns its cost here, because the trustee has never lived in the house and cannot answer what buyers ask; the listing should say plainly that the property is sold in its present condition by an estate with limited knowledge, though a trustee who knows about a wet basement still has to disclose it. Rural estates in the north townships carry their own list: the well needs a bacteriological water test, the septic system needs an inspection and a pump-out receipt, farmland may sit in the farm property tax class under a tenant farmer's crop lease that runs past closing, and lots that look severable usually are not, because the Oak Ridges Moraine and Greenbelt plans restrict new lots. The conservation authority for the watershed sets what can be built near water.

The proceeds of sale sit in the estate's account, or in the lawyer's trust account, until the trustee is satisfied that every debt and every tax is paid. The Income Tax Act makes a trustee who distributes property before obtaining a clearance certificate personally liable for the deceased's and the estate's unpaid taxes, up to the value of what was distributed. The certificate is requested on Form TX19 once the final return and any T3 returns have been filed and assessed, and it can take months to arrive, so many trustees make an interim distribution while holding back enough to cover the tax on the house sale and a margin for surprises, with the beneficiaries' written acknowledgment. Other items to settle before the final distribution: the last property tax bill and any supplementary bill after a reassessment by MPAC, the final water and hydro accounts, a rental water heater contract that has to be assumed or bought out, and the trustee's own compensation, which the beneficiaries or the court must approve. A simple accounting that lists what came in and what went out, with receipts, protects the trustee if a beneficiary later asks questions, and in a family with several children someone usually does.

If you are the estate trustee for a house anywhere in Durham, ask Randy and Alexander Miller for a date-of-death opinion of value and a listing plan that fits the probate timeline your lawyer expects.