What is probate? Blog post by Financial Concierge

Probate Estate Administration: Plan Ahead to Reduce Probate Fees in Canada

Learn how probate can impact your estate settlement. Planning ahead for probate administration can reduce fees and streamline the process.

Probate Defined

Probate is what gives the executor the authority to act on behalf of the deceased. The two areas the Court will want to know about are:

Not all estates require probate, however, the number of estates that can be settled quickly without probate is low. And just because those involved think the will is straight forward does not mean probate will be exempted.

The type and value of assets in the estate, and the likelihood that the executor’s actions might be contested by one or more beneficiaries or others will determine if probate is required. Generally, financial institutions (like banks) and land registry offices ensure probate occurs to validate the executor is authorized to receive the assets.

Probate Fees Vary by Province and Estate Value

Probate fees are essentially an estate tax levied by the government on an estate’s total value. The total value is comprised of various estate assets, including a primary residence, cottage or investment properties, and registered and non-registered investments. Basically fees are applied to any asset that falls under the deceased’s estate.

The calculation of probate fees varies by province and are based on estate value. Below is the probate fee schedule for B.C., Alberta and Ontario:

  • Up to $25,000: No fee
  • Between $25,000 and $50,000: ($6 per $1000 or portion 0.6%)
  • Over $50,000: ($14 per $1000 or portion 1.40%)
  • Additional administration fee of $200 for estate values over $25,000.
  • $10,000 or less: $35
  • Over $10,000 but not more than $25,000: $135
  • Over $25,000 but not more than $125,000: $275
  • Over $125,000 but not more than $250,000: $400
  • Over $250,000: $525
  • $50,000 or less – no estate tax (probate fees)
  • Over $50,000 – $15 for every $1000 or portion 1.50%

4 Ways to Avoid Probate

There are strategies you can deploy to reduce probate fees and ensure that  most, if not all, of your estate assets are distributed exactly as you wish.

With smart planning and help from a professional executor estate services provider, you can set up some or most of your assets to bypass your estate and hence avoid probate.

Here are four ways to do this:

  1. Designate a beneficiary to your Life Insurance, RRSPs, RRIFs, Tax-Free Savings Accounts (TFSAs), and other Non-Registered assets. Naming a beneficiary enables these funds to be distributed directly to them and bypass your estate, avoiding probate.
  2. Gift money to your loved ones while you’re still living. For older adults with significant amounts of money who know they will not need it for themselves, give the money to a loved one who will be able to put that money to good use. You leave a meaningful legacy, and because the asset is out of your hands when you pass away it is not part of your estate and not subject to probate.
  3. Make your accounts joint ownership with the right of survivorship. This is a way to avoid probate fees but it comes with risk. Joint ownership with a spouse on bank accounts, the home, and non-registered accounts is a good idea. Joint ownership with children can have negative consequences while alive and after death, depending on the family dynamics. Do your research before making such an important decision.
  4. Establish a trust. Another method to ensure assets bypass the estate is to establish a trust. Testamentary Trusts are used at the time of death and can be a great tool for estate planning to help minimize taxes. Your trust will be managed by an estate trustee, who you will name in your will

Be Prepared - Have a Current, Valid Will

Dying without a will means leaving all decisions about the distribution of your assets up to the government. Depending on your family situation, the government dictates the order of who receives the assets, how much is allocated to each individual and timing of distribution.

Your will is the only way you can control what happens to your estate after you pass away. It will ensure your hard earned assets go to the individuals of your choosing at the time of your choosing. It also ensures your estate is managed by the executor of your choosing.

Smart Estate Planning Considers Probate

Depending on which Canadian province you live in and your estate value, probate fees may not be as high as you think. If you use the steps noted above to reduce this estate tax while being mindful not to compromise your financial position while living, you can create an estate plan that includes probate avoidance without giving away more money than you can afford.

Understanding how probate works in Canada and the impact it could have on your estate will help you manage family pressure to make decisions that may benefit them, but not necessarily be in your best interest. Take time to know the costs and what you can do to minimize those costs. 

Professional estate service providers can help you develop a plan with probate in mind. And professional executors can help with the complexities of probate administration.

Need help with estate administration?

Hire Financial Concierge as your professional executor!

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