Avoiding Probate on Real Estate: Understanding the First Dealings Exemption in Ontario

The probate process in Ontario can be costly and complex, especially for families trying to transfer real estate after someone passes away. Fortunately, there are some tools available to help reduce or even avoid probate on certain real estate. One of these tools is the first dealings exemption, a relatively obscure but powerful rule that applies to certain properties based on how Ontario's land registry system changed over time.

Understanding how this exemption works, and how to incorporate it into your estate planning, can make a meaningful difference in the administration of an estate.

What Is the First Dealings Exemption in Ontario?

The first dealings exemption is available for properties that were originally registered under Ontario’s Registry System and later automatically converted into the Land Titles System. This system change was implemented for administrative efficiency and to modernize the province’s land records. Properties that were moved over in this way were marked as Land Titles Conversion Qualified.

Under this designation, the first transfer of the property following the owner’s death may not require probate, as long as specific conditions are met. If a property qualifies, the estate trustee may be able to transfer it directly to a beneficiary without obtaining probate, avoiding the Estate Administration Tax on that asset. For high-value real estate, this can mean substantial tax savings.

How Do You Know if a Property Qualifies?

Determining whether a property qualifies for the first dealings exemption requires some investigation. First, the property must be in the Land Titles system and still carry the Land Titles Conversion Qualified label. If the title has been updated to say something such as “Land Titles Absolute”, the exemption is no longer available. You can search a property’s title through Ontario’s OnLand portal for a fee, but interpreting the results often requires an estate lawyer’s assistance to confirm whether the property still qualifies.

The deceased must have acquired the property before it was moved into the Land Titles system. The exemption applies only to the first transfer of ownership after the conversion. If the property has been sold or transferred since that time, even within the family, that transfer qualifies as a “dealing” and removes the exemption. However, not all title activity is considered a dealing. For example, mortgages, liens, and similar registrations generally won’t affect eligibility. The key is whether there has been a change in ownership or other dealing as defined under Ontario land law.

Even when a property qualifies for the exemption, probate may still be required for other assets in the estate. As discussed in my blog on estate assets in Ontario, only certain types of property are subject to probate. Because probate may still be required for other assets in the estate, many Ontario estate plans use multiple wills (Primary and Secondary Wills). A primary Will deals with assets that require probate, such as publicly traded investments or bank accounts. A secondary Will can be used for probate-exempt assets, including real estate that qualifies under the first dealings exemption. When structured properly, the assets covered by the secondary Will can be transferred without triggering probate or Estate Administration Tax. To avoid Estate Administration Tax on a qualified first dealings property you must utilize multiple Wills.

Why It Matters

Probate plays an important legal role, confirming the validity of a Will and authorizing the estate trustee to act. But if a property qualifies for an exemption, there’s no reason to include it in the probate process unnecessarily.

The first dealings exemption provides a valuable opportunity to pass real estate to beneficiaries without triggering probate or Estate Administration Tax by using multiple Wills. Routine changes, like a lifetime transfer of ownership or certain updates on title, can unintentionally disqualify the property. That’s why advance planning is essential.

If you’re administering an estate or assisting a loved one with their planning and you believe a property may qualify for the exemption, consult an estate lawyer before taking any steps that could impact title status.

Estate planning isn’t just about preparing for the inevitable, it’s about making informed, proactive choices that protect your legacy and your loved ones. In Ontario, tools like the first dealings exemption can help minimize administrative delays and reduce the cost of settling an estate. But these tools only work if properly implemented.

If you have questions about whether a property qualifies for the first dealings exemption, I’d be happy to assist. Reach out today to start the conversation.

This article is intended for informational purposes only. For personalized advice tailored to your specific circumstance, please reach out to the E is for Estates team.

Erin L. Watson, B.A., JD

Lawyer & Notary Public

E is for Estates