Nobody likes to pay more taxes than they must. Nobody likes spending money on lawyers and the courts, either. Avoiding the probate process and probate fees is one reason to do your estate planning. Just don’t make it the driving reason.
Doing estate planning solely to avoid the probate process and probate fees is like choosing the place you retire based solely on the weather. Great weather, like avoiding probate taxes, is wonderful. But in choosing your retirement home, you also want a safe place, clean water, good food, and access to medical care. That’s why nobody retires in Burma. If avoiding probate taxes means more income taxes, more problems settling your estate, and more bad blood among your children, then the cost of avoiding probate fees is not worth the trouble!
What is probate?
The probate process is a legal process that occurs after death and is intended to prove that a Will is indeed the Last Will and Testament of a deceased person. At the conclusion of a probate process, a court of law grants an executor the power to settle an estate. The probate process involves various expenses; for example, court fees and lawyer’s fees. Without a grant of probate, the institutions that hold or register your assets are unlikely to deal with your executor. Those institutions include banks and the land titles office.
You cannot avoid the probate process by not having a Will. If there is no Will, then the probate process is replaced by a legal process to appoint an executor to settle your estate and decide how to distribute it. This process is likely to be more expensive than the probate process.
Probate fees, if levied by the province where you live, are based on the assets you own at the time of your death.
How to avoid Probate Fees?
The only way to ensure that your estate will completely avoid probate taxes is to have nothing in your estate when you die. Other strategies to avoid the probate process and minimize probate fees include:
Giving away your assets before you die (directly to others, or by putting your assets into trusts)
Designating beneficiaries (other than your estate) on your registered investments, life insurance policies and other investments held through life insurance companies, and
Holding your assets jointly with others.
Each of these methods can be appropriate at various times, but each also has potential drawbacks, therefore these methods must be used carefully. Remember, that avoiding probate is only one goal of your estate planning. Don’t place too much emphasis on this issue alone.