Avoiding Probate

Probate is a commonly used term for a process of formally proving someone’s Will and appointing an executor of the estate by the court. The last Will is always valid even without a probate if it meets basic legal requirements, the probate is a legal process in which a court formally issues a certificate and officially appoints an executor of an estate. The proper legal name for this process is “Application for Certificate of Estate Trustee” and is not always required in Ontario. Because of the fees that are payable to the court when applying for probate and the time involved with process good estate planning tries to avoid need for probate or at least to minimize the value of estate for probate fee purposes.

The probate fees in Ontario are officially called “Estate Administration Tax” and the current rate is 0.5 % on the first $50,000 of the estate value and 1.5 % thereafter. As an example, an estate valued at one million dollars would have to pay $14,500 on probate fees. In addition, the process of applying for probate usually involve retaining a Lawyer and accruing legal fees and there are also time considerations, as it might take anywhere from couple of weeks to a few months for the court to issue a probate certificate. Further, if the executor of the will lives in a different province or different country, the court would usually require an executor to post a security bond for the value of the estate, which carries a very significant cost for the estate. For all those and other reasons, good estate planning tries to avoid the need for probate.

When is probate required?

The probate is normally required by various institutions that hold deceased assets before they release those assets to the executor of the estate. Below is a non-exhaustive list of circumstances when probate is usually required:

Bank accounts and safety deposit boxes held at a financial institution: Each bank or trust company has its own rules and limits on the value of assets held with the institution for which they would not require a probate. With some banks it could be 20K and with some 100K.- Investment companies, where the deceased held his or her investments.
Stock exchange, if stocks in public company were held directly.
Insurance companies where the deceased had a life insurance policy and the policy is payable to the estate. Again, insurance companies have their own limits on the value of the policy and do not usually require a probate when the value of a policy is not very significant.
Land Registry Office, in order to transfer the ownership of the property to the estate, unless the property was held in joint ownership.

Once the probate is required, values of all the assets of the deceased that form part of the estate are included for the purpose of calculating the probate fees. Generally, the debts of the deceased cannot be subtracted from the value of the estate, except for the mortgage on a real estate property.

There are number of ways to avoid probate or to minimize the number of assets that should be included in a probate:

Beneficiary designation: Holders of RRSP, RRIF, Tax-No Obligation Savings Accounts and Insurance policies can designate a beneficiary. Such designation can be done through the institution that is administering the assets or person can designate beneficiaries in a will. The designation that was done later in time prevails over the earlier one. Proceeds from those accounts or policies go directly to the beneficiary and do not become part of the estate
Joint ownership of property: The surviving joint owner becomes the sole owner of property by way of survivorship and the property does not become part of the estate.
Spreading assets to different banks: This is an option when the assets held in the bank or investment accounts are not significantly large, but big enough to keep for the financial institution to require a probate if all those assets are held only in one institution. With spreading assets equally between two or more institutions the probate might not be required.
Holding all your assets that might require probate in a jurisdiction with lower probate fees such as Quebec. This option is particularly advisable for people living close to the province with lower jurisdiction, such as Ottawa. Quebec probate fees are a lot lower than in Ontario. If the only assets that might require probate are your bank accounts or investment accounts, it might be advisable to open an account in Quebec with one of the major financial institutions and move your assets to that account. The probate application can be then made in Quebec.
Having Multiple Wills for different assets. Law in Ontario allows a person to make multiple wills for different assets, such as one will that only deals with you property in Florida, another will that deals with your corporate assets, if you own a business, and another one that deals with the rest of your assets. If there are multiple wills, only the will that deals with the assets that require probate would have to be probated. Those wills have to be carefully drafted. Good estate planning tries to limit the expense of administering the estate and transferring the property to various beneficiaries. Avoiding probate or limiting the value of assets for probate purposes is certainly one of the ways how to minimize such expense. If you think that your estate might need to be probated after your death you should seek advice from a Lawyer with expertise in estate planning.

Frequently Asked Questions

Wills - How are they validated? Can I hand write my own?

I made my own hand-written will few years ago. I believe it’s valid and truly reflects my wishes, however my financial advisor told me I should get a proper will drafted by a Lawyer. Why should I do that?

‍Wills are legal documents that will dictate the distribution of assets after one’s passing and there are many reasons why wills should be prepared by a Lawyer specializing in this area of law.

‍Formal validity For wills to be valid and legally binding they have to be executed (signed) according to legal requirements. A Lawyer preparing your will would ensure that the document is executed properly and therefore legally valid and binding.

‍Comprehensiveness A Lawyer can make sure your will deals with all important matters, such as appointment of executor(s) and alternate executor(s), distribution of your assets, appointment of custodians and guardians for your children and setting up trusts for minor beneficiaries. Your Lawyer will also ensure your will gives executors enough powers to properly and efficiently administer your estate and follow your testamentary wishes.

‍Reflecting all your legal obligation

‍Under the law you are obliged to provide for your spouse and your dependents. Your Lawyer can advise you of your obligations to such persons.

‍Clarity of language

‍A properly drafted will should use language that is clear and precise in order to prevent any issues with interpreting your instructions contained in the document. Your Lawyer will make sure that proper language is being used to avoid any ambiguities and clearly reflect your intentions.

‍Preventing future challenges to your will

‍Having a Lawyer draft your will significantly reduces any risk of future legal challenge to its validity based on your legal capacity or any undue influence. When your legal capacity might be an issue, your Lawyer will gather and keep all the required evidence to prove you had the necessary legal capacity to make a will. He or she will also ensure there is no undue influence from any individuals, including family members that would affect any of the provisions of your will.

I'm married without children, do I need a will?

We have been married for the last 25 years but don’t have any children. Do we need a will, or would everything just go to the surviving spouse anyway?

‍Yes, you do need a will. Whenever you don’t have any children, under the statutory distribution scheme for individuals that die without a will, your spouse would receive your entire estate. However, you should still have a will for at least two reasons:

Appointing an executor of your estate; and
Making instructions for the distribution of your estate in the event that you’re predeceased by your spouse.

Appointment of an executor of your estate.‍

The executor named in a will has the legal authority to take possession of all your assets, do your final income tax returns, and deal with banks and government institutions. If you don’t have a will, a court would have to appoint an executor of your estate to deal with any assets that were not jointly owned, as well as any registered investments that did not have a named beneficiary. The process of appointing an executor usually takes few months, so in addition to incurring unnecessary costs, there will be an extended delay during which your spouse will not have access to the assets in your estate. In my experience, some financial institutions will waive a probate requirement if your spouse is the named executor and the only beneficiary of your estate, which could provide your spouse with ready access to some assets shortly after your death.

‍Distribution of your estate if you survive your spouse.

‍By having a will in place, you will make sure that your estate is distributed the way you want it to be in the event that your spouse passes away shortly before you, or in the event that you are unable to make a will after your spouse’s death. Under the statutory distribution scheme, if you don’t have a spouse nor children, your estate would go to your parents. Alternatively, if your parents are deceased, your estate would go to your siblings. This may not be your wish. For example you might want to leave part of your estate to your spouse’s family, or you may wish to skip your parents and siblings and distribute the estate among your and your spouse’s nieces and nephews, or make gifts to a charity or charities. No matter which option you choose, having a will can provide the peace of mind of knowing that your estate will be distributed according to your wishes.

Do I need a will?

We have been married for the last 25 years but don’t have any children. Do we need a will, or would everything just go to the surviving spouse anyway?

Appointing an executor of your estate; and
Making instructions for the distribution of your estate in the event that you’re predeceased by your spouse.

Appointment of an executor of your estate.

‍The executor named in a will has the legal authority to take possession of all your assets, do your final income tax returns, and deal with banks and government institutions. If you don’t have a will, a court would have to appoint an executor of your estate to deal with any assets that were not jointly owned, as well as any registered investments that did not have a named beneficiary. The process of appointing an executor usually takes few months, so in addition to incurring unnecessary costs, there will be an extended delay during which your spouse will not have access to the assets in your estate. In my experience, some financial institutions will waive a probate requirement if your spouse is the named executor and the only beneficiary of your estate, which could provide your spouse with ready access to some assets shortly after your death.

‍Distribution of your estate if you survive your spouse.