Your Money Matters

PROBATE FEES BY PROVINCE
*The rates in this table are believed to be accurate as of June 1, 2009. Please check with your local provincial court for the most current rates in your area.

Certain assets held by the decease are excluded from the estate for probate purposes. These normally include:

• Assets held in joint tenancy with rights of survivorship
   

• Insurance proceeds with named beneficiary
   

• Registered accounts with named beneficiary
   

• Real estate held outside of Ontario (however may be subject to probate in the province where it is situated

The existence of a will unless found to be invalid, may avoid an intestacy. Where an individual dies intestate, probate fees may automatically apply. Therefore, having a will drafted and executed at least avoids the possibility of triggering probate fees.

Owning assets in joint tenancy with a spouse, child or family member is one way to avoid probate. Under joint tenancy, the interest of the deceased automatically reverts to the survivor(s) upon death and therefore the transfer can occur outside of the estate without the necessity of probate. However, careful consideration should be given to holding title in this manner.

1. A loss of control over the asset once it is held jointly. For instance, consider naming a child jointly on a parent’s bank account to avoid probate. Assets held in a joint bank account and passing by survivorship flow outside of the estate and are not subject to probate fees. However, with this type of arrangement both the parent and child has access to funds, which may not be a desired outcome.
    
2. It is not uncommon for an elderly person to transfer assets into joint ownership so the child can assist in administering the parent’s financial affairs as well as avoid the issue of probate upon death. After the death of the parent, the question arises as to whether the transfer was intended to effect a gift or whether it was simply for convenience. The question becomes was this advancement of an inheritance or was the property transferred to the other party to hold in trust for the beneficiaries of the estate.
    
3. There are also family law issues to consider in the event that the child that holds the property jointly with a parent has marriage dissolution or break down. There is the potential that the property will be included in the equalization calculation in Ontario.
    
4. Where property is changed from sole ownership to joint ownership tax issues should be considered. There may be a disposition at fair market value of the interest received by the child. The parent must then include any taxable capital gain resulting from the transfer in taxable income.
    
5. Joint tenancy also exposes the interest in the property to the joint tenant’s creditors.

An outright gift of property by a parent to a child results in a transfer of assets outside the estate. Before such action is taken, consideration should be given to similar issues mentioned above. Again, the parent will lose control over the asset.

In Ontario, the value of the estate for probate purposes is reduced by an encumbrance against real property (mortgage/loan). Therefore, debt secured against real property does provide a reduction of value of the estate resulting in less probate fees.

There are many points to consider, other than mentioned in this communication. We strongly recommend that you consult with your legal representative to ensure your will is up to date and all strategies available have been considered.

*Source: Manulife Financial – Tax & Estate Planning


Theresa Wever and the Money Concepts Team.

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