Minimzing Probate

Minimizing probate fees

September 2016

When you pass away it is typically required that your last will and testament be legally approved by the courts under the laws of the province. In addition to legal validation the probate process confirms the appointment of your executor. There are additional benefits to the probate process, however the process is not free. The province of Manitoba charges a fee for probating a will, they charge 0.07% of the value of the estate, or $7 per $1,000. So if $100,000 of assets were probated the fee would be $700. While it is not mandatory most estates do wind up going through the probate process. When planning your estate there are strategies to minimize probate costs. However I should caution extensive efforts to avoid probate, while they may reduce probate fees can create additional complications. I encourage folks to seek proper legal and tax advice when planning their estate. A few strategies you can consider:

Designate Beneficiaries

Any asset with a designated beneficiary will not be part of your estate and will not be subject to probate fees. RRSPs, RRIFs, TFSAs, life insurance policies are all examples of assets that allow you to designate a beneficiary. If you specify an individual as your beneficiary the assets will go directly to them, bypassing your estate.

Early Inheritance

If you give the money away today it will not be part of your estate when you pass on. It is important to ensure that the gift suits your overall intentions and does not negatively impact your current way of life. If you are donating assets to a charity you will likely not have to worry about a tax bill, however if you are gifting assets to your heirs there could be tax consequences. A discussion with your accountant prior to the gift would make sense.

Joint Ownership

If assets are held jointly with rights of survivorship they will not form part of your estate and will bypass probate. Upon your passing the assets will transfer directly to the surviving owner. For estate purposes there are positives and negatives to joint ownership. A full discussion is beyond the scope of this article, suffice it to say that often joint ownership between spouses makes sense, but joint ownership between an elder parent and an adult child (a situation which is becoming more common) can create complications and should be carefully considered.

Assets in trust

If you have money held in a trust it will be dealt with under the terms of the trust and not as part of your estate. The assets in the trust could bypass probate. The taxation of trusts has changed in recent years. Using a trust solely to avoid probate might not be beneficial, however if it suits your overall estate goals,reducing probate can be a nice perk.

No one likes paying additional fees, I believe a prudent estate plan will consider ways to minimize probate costs. However, as mentioned above, I encourage that discussion to include appropriate legal and tax advice to ensure there are no unintended consequences.

 

Clinton Orr B.Comm(hons.), CIM, CFP, DMS, FMA  lives in Beausejour and is a portfolio manager with National Bank Financial.

 

This information transmitted is intended to provide general guidance on matters of interest for the personal use of the reader who accepts full responsibility for its use, and is not to be considered a definitive analysis of the law and factual situation of any particular individual or entity.  As such, it should not be used as a substitute for consultation with a professional accounting, tax, legal or other professional advisor. This commentary reflects my opinions alone, and may not reflect the views of National Bank Financial Group.