Death, Taxes and Probate Fees

There is a saying that nothing in life is certain apart from death and taxes.
Although death is inevitable, there are some ways to minimize those pesky
taxes to ensure that as much of your estate goes to your loved ones as
possible. In this case, let’s look at probate fees, which are a type of tax (or fee)
levied provincially on accumulated assets at death.

What is Probate?

When it comes to handling the assets within your estate, probate has a couple
of meanings. “To probate” is the process by which a will is authenticated and
the Executor named in your will is confirmed under the provincial court of law.
The Executor now has the legal authority to handle your assets as per the
instructions in your will. If you do not leave a will, the probate process is
combined with a more intricate court protocol to appoint an Executor in order
to settle your estate and provincial legislation will then decide how to distribute
your assets (which may not be in the manner in which you intended – this is
why it’s important to have a will). “Probate Fees” are the levies paid from your
estate to the Ministry of Finance. These fees are calculated based on the total
value of all assets you own individually (with a few exceptions) at the time of
death. Once your estate is probated by the courts, the Executor can distribute
the estate’s assets as per the guidelines of your will.

Which Assets are Subject to Probate?

Your estate consists of the following individually owned assets at the time of
death including:

• Bank accounts
• Property
• Car
• Securities
• Jewelry
• Business interests

How are Probate Fees Calculated?

The probate process and its subsequent fees vary depending on the province
where you live and hold assets. At 1.5%, Ontario has one of the highest
probate rates while New Brunswick has one of the lowest at 0.5%. Québec
does not levy probate fees at all, requiring only that non-notarized will be
authenticated by their courts. The lesson here is that rates differ so it
becomes especially important to understand provincial requirements when you
own assets in more than one province.

How can I Minimize my Probate Fees?

With the help of a financial advisor, probate fees can be minimized and ensure
that more of your hard-earned money goes to those you love. Firstly, it is
important to name a beneficiary (other than your estate) on RRSPs, RRIFs,
TFSAs and insurance policies to ensure that this money remains outside of
your estate, thereby avoiding probate. Joint ownership with a spouse on bank
accounts and property is also an effective way to keep these assets outside of
the probate process and in the hands of your spouse. You could gift assets to
family members while you are alive, but unless the assets have no accrued
gain (like cash), a tax liability might be triggered. The use of multiple wills if you
have private company shares and setting up certain types of trusts while you
are alive might be other options to help minimize the assets that are in your
estate upon death.

Each strategy has both its benefits and shortcomings. Let’s get together soon
to get a head-start on your estate planning and to see which approach works
best for you.

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