Business Succession Planning: Recent Changes to Estate Reporting Requirements

Nelligan O'Brien Payne gratefully acknowledges the contribution of Stéphane Serafin, Student-at-Law in writing this blog post.

In 2011, Ontario amended its Estate Administration Tax Act, 1998 in a manner that imposed new reporting duties on estate trustees and executors. These new provisions allow for the possible reassessment of paid estate administration tax for up to four (4) years after the tax becomes due, along with the possibility of extending the reassessment period where the estate administrator or executor does not comply with reporting requirements.

Until recently, there was no regulation specifically prescribing what information the estate trustee or executor had to provide. That changed on January 1st, 2015, when the regulation titled Information Required Under Section 4.1 of the Act came into effect.

Although this new regulation is important generally, it may be particularly important in the context of managing a business succession. Among other things, the regulations impose a reporting requirement with respect to the complete assets of the deceased person used to determine the value of the estate, including the deceased's "common shares, preferred shares, bonds treasury bills and mutual funds". The regulation also imposes reporting requirements with respect to these types of assets where they are "held by an adviser, dealer, financial institution or other person on behalf of the deceased person".

Any person planning for the succession of their business will therefore need to ensure that this information is readily available to his or her eventual estate administrator or executor as part of a comprehensive business succession plan. Any person charged with the administration of an estate will likewise need to comply with these reporting requirements. As with estate planning in general, the objective should be to ensure the orderly and tax-efficient transfer of these business assets.