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

Do I need a lawyer to get a will and powers of attorney?

Your last will does not have to be drafted or signed by a Lawyer. However, a will is a legal document that will determine who will have control of your estate and how it is going to be distributed. There are certain legal requirements that have to be met for the will to be valid. As such it is very important that your will is drafted, signed and witnessed properly.

‍How can a Lawyer help?

‍A Lawyer will ask you right questions to help you determine how to distribute your estate while taking into consideration various contingencies and scenarios that might be in place at the time of your passing. She will discuss with you legal clauses that you might want to include in your will, such as a beneficiary designation for your RRSP and insurance policies, expressing your wishes in regards to the custody of your minor children or confirming compensation for the executor. Your Lawyer will also talk to you about the powers that you want to give to your executor in addition to the powers he would have under current legal framework or limits that you want put on such powers. She will properly draft your will and will try to help you understand all the legal clauses and legalities contained in a will. Your Lawyer will also make sure that your new will revokes all your previous wills or other testamentary documents. Most importantly, your Lawyer will also make sure that your will is properly signed and witnessed.

Your last will is an important legal document and you should retain a professional to help you with its preparation and execution. Seeking and using such help will give you peace of mind knowing that your affairs are in order and make sure that your will reflects all your wishes.

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.

Dementia - What to do with regards to her will and powers of attorney?

My elderly mother was diagnosed with dementia a few months ago. She is rapidly deteriorating. She does not have signed powers of attorney documents. I have three other siblings. We need to sell her house and get access to her finances to pay her bills. What do we have to do?

Lawyer under power of attorney

‍Depending on your mother’s current mental capacity she might still be able to appoint an Lawyer under power of attorney for property or personal care. In order to determine whether you mother still has a mental capacity to execute power of attorney documents she will have to undergo a capacity assessment performed by a specially trained health care professional. If the capacity assessment finds that your mother has capacity to appoint an Lawyer under powers of attorney, she can visit a Lawyer to help her prepare and sign powers of attorney documents.

‍Guardianship

‍If your mother does not have the mental capacity to appoint an Lawyer, you and your siblings can apply to be appointed Guardians of Property for your mother. There are two ways this can be achieved: by applying to the Office of the Public Guardian and Trustee or making an application to the Court. The less costly and simpler way is to apply to the Office of the Public Guardian and Trustee. The process of applying and the application forms can be found on their website. In order to be able to apply to the Office of the Public Guardian and Trustee, you and your siblings would have to agree on whom to appoint as Guardian. In the event you and your siblings cannot agree on the appointment, someone will have to apply to the Court to be appointed Guardian for your mother.