Jun 10, 2022
How long does an executor have to settle an estate in Ontario?
Settling an estate is a challenging responsibility that can often take between six months to a year in Ontario. Here’s what you need to know.
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An expensive, complicated legal and financial process is probably the last thing you want for your loved ones after you pass. Yet this is precisely what can happen when families go through probate, mostly due to poor estate planning. On top of filing any outstanding tax returns the deceased may have had (including a terminal return) and submitting an estate income tax return, the executor will also have to take care of probate taxes. In all states and Canadian provinces except Québec, when an executor applies to the court for probate, a tax must be paid to the corresponding government.
But avoiding the delays and the cost of probate doesn't have to be complicated. Here are a few tips to simplify your estate and, in the best-case scenario, avoid probate altogether:
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One way to avoid a lengthy probate process is to simplify your estate by getting rid of a lot of your property. A good way to do this is to set up a living inheritance: This decision allows you to begin transferring the assets of your estate during your lifetime, also known as gifting. You can gift money, property, investments, vehicles, and much more.
Once you pass, these assets would not be considered part of your estate anymore, as your selected heir would already have possession of the assets. If you’ve simplified your estate enough, your estate executor won’t have to go through probate. Gifting your property can also help reduce the amount of taxes and fees due. Because a living inheritance is considered a gift, any assets bestowed upon a beneficiary aren’t considered income. That means they’re income-tax-free. With a traditional inheritance, a chunk of it may be eaten by taxes owed by a deceased person’s estate before a beneficiary even gets a penny.
You can designate beneficiaries for life insurance, retirement accounts, or registered savings vehicles like IRAs, RRSPs or TFSA before you die. These funds typically go directly to your heirs without having to go through probate. You should also name a secondary beneficiary in case the primary beneficiary pre-deceases you.
Titling your assets to joint ownership can also be a brilliant way to avoid probate. Ideally, assets held jointly with rights of survivors pass directly to the surviving joint owner. However, naming a joint owner when he or she is not the only beneficiary of the estate may cause disagreement between heirs. Additionally, tax consequences, including capital gains property transfer tax, may apply when naming joint owners of the specific property.
A trust enables you to title your assets to it, which will be held by an appointed trustee. After your death, the trust will provide for the distribution of the property. Because the trust owns the property, it is not considered part of your probate estate. No estate means no probate process.
Taking steps now to avoid a costly probate process later guarantees peace of mind for you and your loved ones during a difficult time. Avoiding a probate process can help preserve family privacy, save money, and ease the transfer of assets to your heirs. Although some actions to avoid probate are relatively straightforward, others may need the help of knowledgeable estate planning, tax, and probate experts.
If you need the help of an experienced estate expert, don't hesitate to contact Clear Estate. From helping with the will to filing relevant tax returns, we will lay out the whole process for you to rest easy, knowing precisely that your beneficiaries will receive your assets quickly.