Selling a parent's house after death in Ontario: authority, tax and practical steps

Who has authority to sell a parent's house

After a death, the person who deals with the estate is the estate trustee, often called the executor when the will names one. Per Ontario's page on applying for probate of an estate, probate is a procedure to ask the court to give a person authority to act as estate trustee, or to confirm the authority of a person named in the will.

Ontario says an estate certificate gives that person authority to manage the estate assets and pay the estate debts. If there is no will, or the will does not name a trustee, the page sets out who may apply, starting with a spouse or common-law partner, then close adult relatives. Who signs for the estate, and in what capacity, is the first question to ask an estates lawyer.

Can you sell a house before probate in Ontario?

This is the question people search most, and the honest answer is that it depends on the estate and needs a lawyer. Ontario's probate page says probate is not always required to administer an estate. It also lists situations where probate becomes necessary, including a death without a will, a will that names no trustee, a financial institution that requires proof of legal authority, and an estate that holds real property not passing by survivorship.

Ask your lawyer what evidence of authority a buyer's lawyer will expect to see. Do not sign a listing agreement or an agreement of purchase and sale until an estates lawyer has told you what you need in place. Ask in particular how long the process is likely to take in your case, since that affects when you can list.

Probate basics, from Ontario's own page

The same page describes two kinds of certificate. A Small Estate Certificate is available when the estate is valued at up to $150,000, and a Certificate of Appointment of Estate Trustee is the option above that. The steps include completing the court forms, working out the estate value and the estate administration tax, serving the documents on beneficiaries and filing with the Superior Court of Justice. A bond may be required. The page says applications are typically processed within 15 business days.

It also advises speaking to a lawyer about whether an application is needed, the duties of a trustee and possible challenges. That advice is worth following before you commit to a sale. Ask your lawyer what the timeline and cost look like for this estate.

Estate administration tax on a house

Ontario's estate administration tax page says the estate representative pays when applying for an estate certificate, as a deposit. For applications on or after January 1, 2020, there is no tax on an estate of $50,000 or less. Above that it is $15 for each $1,000 or part of $1,000, and the value rounds up to the nearest thousand. Ontario's example is a $240,000 estate owing $2,850.

For real estate, the page says to use the appraised value at the date of death, whatever the later sale price, and to deduct mortgages and liens. Real estate outside Ontario is excluded. After the certificate issues, an Estate Information Return is due within 180 calendar days, even where the value is $0, and the page lists penalties for not filing or for false statements. Your lawyer will normally handle this.

Jointly owned homes

Ontario's tax page excludes from the estate value assets held jointly that automatically become the other owner's. That is all the page says on the point, and it concerns the tax calculation. Whether the house passed to a surviving owner, and what that means for a sale, depends on how title was held and on documents your lawyer will review. Bring the deed or title search and any will to your first meeting.

Ask the lawyer to explain, in plain words, who the home belongs to now, who must sign to sell it and what a buyer's lawyer will need to see. Write the answers down, share them with the family and keep them with the estate file so that everyone is working from the same understanding. If a question comes up later, such as a buyer's request for a document, you will know where to look and who to ask.

Tax on the home: the deceased's final return and the estate

The CRA's capital gains guide (T4037) lists the death of the owner as a deemed disposition, which means a sale at fair market value for tax purposes, with any capital gain reported on the final return. There is no separate capital gains tax in Canada, as the guide explains.

For a home, the CRA's principal residence page says the legal representative of a deceased person designates the principal residence with Form T1255, rather than Form T2091(IND). If the home was the parent's principal residence, the exemption may cover the gain at death, but only if it is designated properly. See our guide to capital gains when selling an Ontario house for the general rules.

What happens to any change in value between the date of death and the date of sale, and who reports it, is a question for an accountant. So is how a second property or a cottage in the estate is treated. Ask for answers before you set a list price, not after.

What an estate pays and carries while the house sells

Budget for the costs the estate bears, then ask your lawyer and accountant to firm them up. A worked example of the tax: a $600,000 Ontario house with no mortgage, and no other assets, is an estate of $600,000. Ontario's formula gives $15 for each $1,000 above $50,000, which is 550 × $15, or $8,250. A mortgage or lien at the date of death reduces the value used, per the Ontario page.

Other costs are for the lawyer and the brokerage to explain: legal fees for the estate, the commission set in the listing agreement, and the ordinary costs of holding a house until it closes, such as property tax, insurance, heat and hydro. The City of Waterloo, for example, charges $91 per tax certificate, which shows the year's taxes, payment history and any balance. Ask your lawyer which certificates the sale needs.

If the home is a condominium, the buyer's lawyer will want a status certificate. The Condo Authority of Ontario says the corporation can charge up to $100 including taxes and must provide it within 10 days. Ask your lawyer who orders it. The net proceeds guide lists the other lines on a sale.

Working with siblings and beneficiaries

The sale of a family home is often the first decision a family has to make together after a death. It helps to settle the process before the price. Agree who the estate trustee is, who speaks to the lawyer and the agent, and how updates are shared. Put decisions about contents, a list price and an accepted offer in writing, and ask your lawyer what the trustee needs from beneficiaries.

If beneficiaries disagree, or want to keep the house, tell the lawyer early. Ontario's probate page notes that a lawyer can advise on possible challenges, and a dispute is much easier to deal with before a listing than after an offer. Our guide to helping a parent downsize covers the conversations that come before a death, and many of the same points apply afterwards.

Clearing the house

The practical work is often the heaviest. Before anything leaves the house, ask your lawyer who may remove or dispose of contents, and whether beneficiaries need to agree. Keep a list of what was taken, by whom and why, and photograph the rooms.

• Secure the home, and ask your lawyer and the insurer what cover applies to a vacant house
• Keep hydro, heat and water on until the sale closes, and forward the mail
• Find the will, deed, mortgage statements and the latest property tax bill
• Agree with beneficiaries, in writing, who takes what, before items move
• Hire help for the clear-out, for example a senior move manager or an estate sale firm

Our guides to estate sales, consignment and donation and helping a parent downsize cover the contents. The resources page lists local firms checked on their own websites. Ask your lawyer about the insurance question first: flood and home insurance is a related read.

Listing with an agent as estate trustee

An estate trustee who lists a house works with a registered agent like any seller. Per RECO, the RECO Information Guide must be given to a buyer or seller before services or assistance are provided. Read it before you sign. You can confirm an agent is registered with RECO's registrant search.

Tell the agent early that the home is part of an estate, share what your lawyer says about authority, and agree who signs documents. Ask whether the listing agreement can be signed before probate is complete, and have your lawyer confirm. A house that is older may also need preparation, covered in preparing an older Waterloo home to sell, and what the estate must disclose is in Ontario seller disclosures. See also working with a real estate agent in Ontario.

A short list for the first month

• Book a first meeting with an estates lawyer, and bring the will, deed and recent statements
• Ask who has authority to sell and whether probate is needed first
• Ask the lawyer for an estimate of the estate administration tax
• Ask an accountant about the final return and the house
• Keep the home insured, heated and secure
• Only then interview agents, and run numbers with the net proceeds calculator

The costs and taxes page and the net proceeds guide cover the seller-side costs. For the Region, see where to downsize. If you would like a conversation with an agent once your lawyer has cleared the way, you can ask for an introduction to an agent on the operating team at eXp Realty. That is not a search of the whole market.