I know it’s not the nicest topic, but you know what they say…the only things certain in life are death and taxes. So, when the Grim Reaper strikes, don’t leave a huge tax bill for your loved ones!
Most people think that if they leave their assets to their beneficiaries in their will, then they have done their due diligence. This is not accurate information. Not all wills have to go through the probate process but most estates do; and until this process is complete, the executor will not be able to distribute the assets of the estate.
Probate fees must be paid before the court will grant probate.
The amount of probate fees is based on the value of the estate assets. There is an initial filing fee and after the application for probate is filed, but before the court registry will release the grant of probate, the executor is required to pay a tax approaching
1.4 % of the value of the estate!!!
Understand what your probate would look like if you suddenly passed away, and then see if any of the following strategies might make sense for you or your family:
1. Designate beneficiaries
You’ll avoid probate fees on your registered retirement savings plan (RRSP), registered retirement income fund (RRIF) assets and death benefits of any insurance policies on your life if you designate beneficiaries under those plans. By designating beneficiaries (other than your estate), these assets pass directly to the named beneficiaries.
2. Joint ownership
If you hold certain assets jointly, with right of survivorship, those assets will pass outside of your estate directly to the other joint owner(s) at the time of your death and probate fees will be avoided.
3. Giving it away today
If you don’t own an asset at the time of your death, then your estate is reduced in value, and the level of probate fees owing at the time of your death will also be reduced. Make sure you don’t hurt your ability to provide for yourself going forward. Also, giving away assets that have appreciated in value have taxable capital gains-so look into this first!
4. Establish trusts
If assets are held in a trust, they will be dealt with under the terms of the trust rather than as part of your estate when you die, avoiding probate. You might also consider placing assets in a trust for your spouse at the time of your death (a testamentary trust), which can avoid probate a second time when your spouse dies.
I hope this information saves you and your loved ones some of your hard earned dollars.
If you have any questions about any of the information provided, please do not hesitate to contact me!