Probate Planning Strategies

Ashdin Law Probate Planning Strategies

What is Probate?

In our first blog, Why You Should Have a Will, we discussed that obtaining a grant of probate is the process of having a Court of law establish that a Will is valid. The grant of probate also determines the value of an estate in order to calculate the probate fees that are to be paid out of the estate. The probate fee in British Columbia is equal to approximately 1.4% of the value of the assets of the estate. The court process can take several months for an executor to obtain a grant of probate during which time the assets cannot pass to the beneficiaries. Further, the grant of probate is a public document that anybody can access to find out the details of your assets after you pass. However, if planned properly, there are ways to minimize the probate fees or, depending on your personal and financial situation, eliminate the need for obtaining probate. In this blog, we review when probate is necessary, which assets probate fees apply to and some strategies for probate planning.

When is Probate Necessary?

If an individual passes away without having a Will, they are considered to have died “intestate” and a court process will be required which means that the estate will be subject to probate.

On the other hand, if there is a Will, probate is not always necessary. Reasons to obtain probate include:

  • If the estate assets include real estate, stocks, and bonds;
  • If it is unclear that the Will is valid;
  • If challenges to the Will are anticipated; and
  • If distribution of the estate is after 210 days, probate must be obtained.

Which Assets do Probate Fees Apply to?

British Columbia has one of the highest probate fees in Canada. Probate fees apply to the following properties:

  • Real and tangible property including land, stocks and bonds.
  • Intangible property including patents, trademarks, copyrights, goodwill and customer lists.

What are Some Probate Planning Strategies?

There are multiple ways to plan for minimization or elimination of probate.

  • Outright Gift – The simplest strategy is to gift property during your lifetime because this will reduce the value of the assets of your estate. Gifting should be planned carefully as it could trigger unintended tax consequences.
  • Named Beneficiaries – moving assets to vehicles such as life insurance, annuities, and segregated funds is an efficient way to avoid probate. This applies to registered investments such as RRSP’s, RRIF’s, TFSA’s and pensions and also applies to some non registered accounts such as a joint account with gift of beneficial right of survivorship that is offered by certain financial institutions.
  • Joint Tenancy – Joint tenancy is a way to pass on an interest in real estate assets upon death. Using joint tenancy to avoid probate fees should involve careful consideration as there will be a loss of control once the real estate interest is jointly held.
  • Multiple Wills – This strategy requires having one Will for assets that will be subject to probate fees and a second Will for assets that probate fees would not apply to. Multiple Wills must be drafted with great care otherwise all of the estate’s assets could end up being subject to probate.
  • Trusts – Assets that are owned by Inter Vivos Trusts do not form a part of the deceased’s estate and as such are not subject to probate. Some examples of Inter Vivos Trusts include Joint Partner Trusts and Alter Ego Trusts which are also helpful tax planning vehicles. The downside of this strategy is the set-up cost to settle the trust and the ongoing administrative costs to administer the trust. Therefore, it is important to weigh the cost against the benefit of adopting this strategy.

If you would like to learn more about probate minimization strategies, connect with Ish Lila or Shelly Lila at Ashdin Law – Corporate and Tax Lawyers, located in Coquitlam, B.C.

The above provides a practical overview about Probate. This blog is for informational purposes only. Readers are cautioned this blog does not constitute legal or professional advice and should not be relied on as such. Rather, readers should obtain specific legal advice in relation to the issues they are facing.