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Avoiding probate fees in Canada involves implementing strategies such as using beneficiary designations, joint ownership, and establishing trusts to ensure assets pass outside the estate.
I have a 78-year-old mother, and most of her wealth is tied up at the bank. What changes could we make to avoid probate on her future estate?
–Laura
Thanks for your question, Laura. Probate is on the minds of many Canadian families, especially as the value of their assets increase. The cost of probate fees on growing assets needs to be considered in every estate plan.
Let’s review what probate is and the fees Canadians face, before we look at some strategies that could work for your mother, Laura.
The probate process is the legal procedure after death to validate the will and administer the estate. The executor named in the will—or an appointed administrator, if there is no will—is responsible for initiating the application process. The court reviews the application to ensure the will meets the necessary requirements, and it will grant the probate if everything is in order. Then, the executor collects the deceased person’s assets, pays off any debts, and distributes the remaining assets according to the will’s instructions—or the applicable laws of intestacy if there is no will.
What you’re asking about is probate fees. These charges are imposed by the provincial/territorial government on the value of a deceased person’s estate during the probate process. The rules and rates vary across provinces and territories. But generally, these fees are calculated as a percentage of the total estate value and can be significant. They are intended to cover administrative costs associated with probate, such as court proceedings, document processing, and estate administration supervision. It’s important to note that probate fees are separate from income taxes that may apply to the estate. (Find out if you can avoid probate fees on a TFSA.)
As the probate fees can be substantial, especially for larger estates, Laura, individuals may explore estate planning strategies to minimize the probate fees and preserve more of their estate’s value for their beneficiaries. Let’s review a few options that can help to reduce or avoid probate.
One effective method to bypass both the probate process and the fees is to hold assets jointly with rights of survivorship. Assets such as real estate, joint bank accounts and investments may qualify. When one joint owner passes away, ownership automatically transfers to the surviving joint owner without the need for probate. Individuals can ensure that assets are transferred seamlessly by clearly specifying survivorship on legal documents.
Naming beneficiaries for specific assets can be very efficient. Life insurance policies, registered retirement savings plans (RRSPs), registered retirement income funds (RRIFs) and tax-free savings accounts (TFSAs) allow individuals to designate beneficiaries, which saves time and probate fees. These assets bypass the probate process and are directly transferred to the named beneficiaries upon the account holder’s death. Regularly reviewing and updating beneficiary designations with a Certified Financial Planner is crucial to ensure accuracy.
Trusts are effective for avoiding probate while retaining control over assets. Setting up a living trust, such as a “revocable” or “inter vivos” trust, allows individuals to transfer assets to the trust during their lifetime. The trust document specifies how the assets are managed and distributed after the individual’s death, bypassing probate. Consulting with a knowledgeable estate planning professional is essential in ensuring proper set-up.
By gifting assets during their lifetime, individuals can reduce their estate’s value, thereby minimizing the need for probate. Gifted assets no longer form part of the estate upon death. However, it is important to consider tax implications and legal restrictions associated with gifting. Seeking professional advice can ensure compliance with tax laws and proper execution of gifting strategies.
As you can see, Laura, avoiding the probate process can save time, money (ahem, probate fees) and streamline the transfer of assets to beneficiaries via the strategies listed above. Remember, estate planning is a complex process, and individual circumstances are as unique as the person whose name is on the will and their families and love ones involved. It’s always a good idea to get personal and professional advice from lawyers, estate planners and financial advisors to help you navigate the intricacies of avoiding probate effectively.
Thanks for your question.
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It’s important to note that both beneficiary designation outside the will and joint ownership and survivorship are not valid in Quebec.
Beneficiaries for insurance policies as well as all RRSP, TFSA, bank accounts etc must be specified in a will.
Joint holdings (deceased portions of accounts, properties including a house etc) must also be specified in a will.
I am in a situation, where I have a house that is on rented property. I recently included my benfactor on all my investors. Is there anything.Else I can do so that there is no
Fees to come out of in of my estat when I have passed?
Thank you for the question. We invite you to email it to [email protected], where it will be considered for an update or future articles.
My mom placed my brother as joint tenant for her home.At the same time she had a Letter of Trust stating he was holding it in Trust for her estate and the funds from the sell of the house were to be dispersed as per the will. When she passed a lawyer removed her name off deed.
The house was sold 4 months later and the funds will be distributed as per the will.
He owns his own home and was told by the original lawyer if the house is sold before a year from her death, there will no capital gains for him.
Is this info correct
Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
The probate fee is a simple, Province specific percentage. Examples would help a person better understand the cost. But, more importantly, in the question posed, probate may not be required at all.
We owned a condo. My husband bought it when he was single. We got married and was together for 46 years. I worked and contributed to payment of the mortgage. We have a will and we designated it other as beneficiary of our property when one passes. I have a problem when my name is not included in. the title. We don’t have debts and no children. My husband totally forgot to change the ownership as joint. How would I claimed ownership now. Would I pay for probate and by how much. We are legally married and I am the benificiary of our assest
Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists.