Probate fees and Your Estate

Probate fees are charged by the courts in each province to grant letters probate which confirm that the deceased’s will is valid and the executor has the authority to administer the estate.

The probate charge generally applies to the total value of an estate’s assets at the time of death, without any deduction for debts other than those encumbering real property. In some cases, the assets can be distributed and the estate wound up without probate but probate is generally required before third parties such as financial institutions (e.g. banks, investment dealers) will release property to the executor or estate trustee. If there is no will, probate is still required because the court has to confirm that an executor has been appointed to distribute the deceased’s property as required by law.

Probate fees in British Columbia are 1.4% of the value of the estate in excess of $50,000.

The fee generally applies to the total value of the assets of the estate at the time of death, without any deduction for debts other than those encumbering real property. Property held by two people as “joint tenants” with right of survivorship (rather than as “tenants in common”) is not subject to probate, since on the death of the one joint tenant the property does not form part of the estate but simply becomes wholly owned by the other.

The following techniques can reduce the cost of probating your estate. Note, however, that any planning to reduce probate fees must take numerous other issues (such as family law, income tax effects, land transfer tax, GST and other sales taxes) into account – professional advice is strongly recommended:

If you are leaving property to your spouse (or another person), consider holding the property as joint tenants with your spouse (or that other person) with a right of survivorship. On your death, the property will pass automatically to the other joint tenant and will not form part of your estate. Note that there may be immediate adverse tax consequences if you transfer the property to a joint tenant who is someone other than your spouse. Also, there are some situations where a joint tenancy will be severed on death by provincial legislation.

Try to keep certain asset out of the estate. This is quite practical in the case of life insurance and RRSP’s issued by life insurance companies, where beneficiaries (other than the estate) can be designated in the RRSP plan documents or in the life insurance policy. Also consider transferring property during your lifetime, either directly to your intended beneficiaries or to a trust. Again, take care that this does not result in the premature recognition of accrued capital gains.

Change the location of property to a jurisdiction where probate fees are low or fixed (for example, Alberta) through the use of a holding company incorporated in the lower-fee jurisdiction. You would then prepare a separate will dealing with the shares of that company.

If you own real estate with no mortgage, and you also owe money (perhaps on a personal line of credit or on a debt secured by other assets), consider having the debt converted to a mortgage or charge on the real estate. It may then reduce the value of the real estate for probate purposes.

If you have certain assets that can be passed to beneficiaries without probate, such as shares in a private company, you may be able to reduce probate fees by making a secondary will that only includes these assets. Your executor would then apply for probate on the primary will but not the secondary one.

If you are age 65 or over, two types of trust – “alter ego” and “joint partner” trusts – can help you keep assets out of your estate and reduce its value for probate purposes without giving up your right to those assets during your lifetime.

For more information on how to structure your estate in the most efficient way possible, call me and we can arrange a meeting with our resident Estate and Insurance Specialist, Chris Canavan.