When it comes to succession and inheritance, one usually unavoidable factor is the probate fees, where you’re essentially paying a tax to inherit what is rightfully already yours. At times the probate fee can be quite significant, leaving family members and loved ones with a lot less than what the deceased had left them.
Understanding Probate Fees in Canada
Before we get into probate fees, first let us understand what is probate.
Probate refers to a legal process whereby a deceased person’s will is validated. The executor that has been named under the will is responsible for submitting the probate application to the courts, who shall then review the will to confirm that all the requirements given under the law have been adequately fulfilled.
If the will is in order and meets all these requirements, the court then grants probate, which is what gives the executor the legal right to execute the will. During this process, the provincial government will charge a tax, which is calculated based on the value of the deceased’s property.
This tax is called probate fees and the justification for this charge is to meet certain administrative costs associated with probate. These include estate administration supervision, the cost of court proceedings, and document processing.
You should know that the probate fee is completely separate from income tax that could apply to the different assets in the deceased’s estate. It’s also important to note that each province has prescribed its own probate fees.
In Alberta, the probate fee is fixed based on thresholds of the value of the estate of the deceased. Where the estate is valued at $10,000 or less, the probate fee is $35; for estates valued over $10,000, and up to $25,000, the fee is $135; estates valued over $25,000 and up to $125,000 have a probate fee of $275; estates valued over $125,000 and up to $250,000 have a probate fee of $400; estates valued over $250,000 have a probate fee of $525.
In contrast, a province like British Columbia prescribes a percentage-based fee for different thresholds. Luckily, however, if the value of the deceased’s estate does not exceed $25,000, then there is no probate fee in British Columbia. If the value of the estate exceeds $25,000 and goes up to $50,000, the probate fee is 0.6%. If the value exceeds $50,000, then the probate fee is 1.4%.
The highest probate fee is charged in Ontario. If the estate is valued under $1000, then there is no fee, but up to $50,000 there is a 0.5% fee. On estates valued above $50,000, the probate fee is 1.5%.
Effective Strategies to Reduce Probate Fees
Under estate planning, you can implement various types of strategies that would reduce probate fees. Not only that, but estate planning also allows you to transfer assets at a faster rate, so you’re saving both time and money.
The strategies we discuss will do just that, allowing you to preserve the assets that you’ve worked so hard to achieve.
Joint Ownership With The Right Of Survivorship
Joint ownership, with the right of survivorship, is a very effective way to eliminate probate fees, especially for bank accounts and real estate. Joint ownership with the right of survivorship means that the asset is held jointly by two individuals and upon the death of any one of the owners, the other becomes the sole owner of the asset.
For joint ownership to validly exist, you need to ensure the right paperwork is executed and any other legal requirements are also fulfilled. So, if you are considering joint ownership with the right of survivorship for your estate planning, be sure to consult with a reputable financial advisor or lawyer.
Specifying Beneficiaries In Registered Accounts
If your estate includes accounts such as registered retirement income funds (RRIFs), tax-free savings accounts (TFSAs), or registered retirement savings plans (RRSPs), then you have the option to name a beneficiary under them. These types of accounts allow for them to be transferred directly to the beneficiary upon your death, without having to go through the entire probate process.
However, be sure you keep these details updated at all times to ensure the transfer of these accounts takes place exactly according to your wishes as, after your death, no individual other than the named beneficiary will be allowed to claim ownership despite how strong and merited the claim might be.
Living Trusts
Living trusts, or Intervivos trusts, accomplish several things when it comes to estate planning. You can maintain control of your assets, also after your death since you’ve designated a trustee to manage the trust and the assets underneath it.
Moreover, since the courts have no involvement in the trust and its affairs, the assets can be distributed in a much more efficient manner, all without having to worry about probate fees.
Another advantage of living trusts is that privacy is maintained. Wills and court proceedings are a matter of public record while living trusts are essentially private documents that are not accessible to the general public.
For Professional Guidance Speak To An Expert At Eastport Financial Group!
While the above strategies for mitigating probate fees may seem straightforward, there are complexities involved including paperwork, coordination with commercial bodies, and registrations. There are also other tax considerations to take into account, such as income tax, and how they can affect the estate.
As such, it would be best to consult with financial advisors so you have a holistic understanding of your estate’s finances, how to implement an effective succession and inheritance plan, and mitigate probate fees wherever possible.
