In Ontario, the executor named in your Will has the legal authority to deal with your estate assets in accordance with the provisions thereof upon your death. There are, however, instances in which third parties, such as financial institutions, will require proof that the executor has authority to deal with your assets.
The process of probate, which involves Court approval of the Will, authenticates the Will and provides proof that your executor is authorized to deal with your assets in accordance with its terms. As part of the probate process, an estate administration tax, more commonly known as probate fees, is levied by the provincial government on the value of your estate assets. Currently, in Ontario, the probate fees are $5 for every $1,000 of the first $50,000 of the estate assets (a total of $250) and $15 for every $1,000 of the estate that exceeds $50,000. Probate fees can be substantial depending upon the size of your estate.
There are a number of ways to minimize or avoid probate fees on death. These include:
Certain assets in your estate, including shares or debt obligations in a private corporation, may not require probate. Such shares are generally left to family members (or dealt with pursuant to a shareholders agreement) who do not require confirmation of the executor’s power to act under the Will. Based upon recent case law in Ontario and current legislation, it is acceptable for individuals to prepare one Will dealing with assets which must be probated, such as financial investments, publicly traded shares and real estate registered in the Land Titles system, and a second Will dealing with assets that will not be subject to probate fees such as shares or debt obligations in private corporations. If your private corporation has significant value, then the use of multiple wills can result in significant savings in probate fees.
If you gift your assets to third parties during your lifetime you will avoid probate fees since these assets will obviously not form part of your estate on your death.
Assets held in joint tenancy pass directly to the surviving tenant, never forming part of your estate, thereby avoiding probate fees.
Assets such as pension plans, RRSPs and life insurance, where you have designated a beneficiary other than your estate, pass automatically to the designated beneficiary, again avoiding probate fees.
During your lifetime you can transfer legal title of your assets to a trust. Since these assets do not form part of your estate, probate fees are avoided.
Whether or not the above strategies will be useful to you will depend to a great extent on the assets comprising your estate and your circumstances. The tax consequences of gifting or transferring assets during your lifetime will also require careful review.
In addition to probate fee minimization, careful consideration should be given to the many other estate planning issues including tax consequences and succession planning. You should consult with your lawyer and other business professionals to address all of the relevant estate planning considerations.
Lisa Gazzola is a partner at SmithValeriote Law Firm LLP. She has a solicitor’s practice and assists individuals and business owners with their estate planning needs.
SmithValeriote Law Firm LLP
100-105 Silvercreek Pkwy, N.
P.O. Box 1240
Tel: (519) 837-2100
Fax: (519) 837-1617
The content of this article is intended to provide a general guide to the subject matter and is not legal advice. Specialist advice should be sought regarding your specific circumstance.