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Evaluating Professional Fee Caps in Estate Calculations: A Necessary Adjustment?


Exploring Adjustments to Estate Calculations: Professional Fee Caps Consideration

As an advisor, should we consider capping professional fees in version 2.0 of the estate calculation, given that personal income tax, professional fees (at 3% of the gross estate), and probate fees are all included in the calculation? The concern arises from $200,000 in professional fees being added to $7 million of corporate money, potentially skewing the calculation. Am I overlooking any pertinent details?

Answer: Estate fees and taxes are calculated as follows:

  • Terminal Income Tax: This is the difference in income tax payable in the year of the estate calculation due to the liquidation of all registered investments and the realization of all unrealized gains in personal non-registered accounts. Note that this does not include the realization of gains in corporate accounts.

  • Legal and Accounting Fees: These are calculated as 3% of the gross estate value. There is no cap, and no graduated rates are applied.

  • Probate Fees: These vary by province and are only calculated where they scale with the amount of money in the estate. For example, Ontario’s 1.5% probate fee on gross estate amounts in excess of $50,000 is included, but Quebec’s flat $217 court fee to verify a will is not.

Considering the potential skew due to high professional fees, capping these fees in version 2.0 might be a prudent update.

Keywords: Estate Fees Calculation, Probate Fees, Terminal Income Tax


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