Jan 12, 2022
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Being an estate executor is a big responsibility. Here are the requirements for being an executor in Florida.
What is probate and what are probate fees?
How are probate fees calculated in Ontario?
When is probate required in Ontario?
Avoiding Probate in Ontario
1. Simplify the estate
2. Name Beneficiaries
3. Set up a trust
4. Create Joint Ownership of Assets with Rights of Survivorship
5. Consult estate administrators
Probate in Ontario
Going through probate and settling an estate can prove to be a lengthy and costly process, especially if it is your first time. While there are a number of tactics you can employ to reduce the probate timeline, probate fees, also known as an estate administration tax, in most instances are unavoidable. These fees are imposed and collected by the provincial or territorial government in which the estate is being probated.
Every province or territory calculates their probate fees slightly differently depending on the jurisdiction. Probate is usually required for estates in Ontario other than in extremely rare cases where it has been waived due to rigorous estate planning. From gifting assets to loved ones before death, to updating your beneficiaries, there are ways to expedite the probate process. Clear Estate is here to help simplify the probate process, offering estate executors and beneficiaries alike one-on-one support and access to an abundance of estate planning expertise.
Here is a closer look at probate fees, what they’re all about, and how they are calculated in Ontario.
We regularly share relevant information about wills and estates.
Simply put, probate is the legal process in which the will is proved in court as the deceased’s “true last living testament” and could take more time than you think. This process can lead to unforeseen costs and legal delays, especially if no estate planning has taken place prior to death, or if the estate is a complicated one. Your best bet at avoiding probate in Ontario is to get your affairs in order as much as possible before death and simplify the estate.
The probate process, as illustrated, is not a free one. Probate fees, commonly referred to as estate administration fees, are charged after the probate court has validated the deceased’s will and independently evaluated all their assets. Probate fees will vary depending on the province, territory, or state, with each jurisdiction applying their own calculation. For example, probate courts in California charge 4% on the first 100,000% of the estate, whereas in Arizona’s Maricopa County, probate fees range from 266$ to 320$ in probate fees.
In Ontario, probate fees will ultimately depend on the size of the estate. In all cases, however, the first 50,000$ of the estate is not taxed. Crafty estate administrators keep this in mind when planning the estate and will look to simplify the estate as much as possible beforehand to avoid probate altogether.
After the initial 50,000$ threshold has been reached, the probate fees begin. Ontario probate courts charge 15$ on every 1000$ after the 50,000$ mark. For example, if your loved one’s estate is valued at 250,000$, only 200,000$ of it will be taxed.
Simply divide that amount by 1000$ (200) and multiply it by 15$. In this case, the probate fees in Ontario would cost approximately 3000$. If this calculation is still unclear, Clear Estate’s Ontario Probate Fee Calculator is here to remove all the guesswork based on the value of the estate. This will give you a quick snapshot of the probate fees you should expect to pay in Ontario, however, if you have any additional questions, you can always book a free consultation with Clear Estate.
Probate is typically required for most estates in Ontario, unless it has been waived due to estate planning. While avoiding probate in Ontario is rare, there are certain instances where this legal process is not necessary. One instance where probate is not required in Ontario is when the estate is passing from “the first spouse to die to their partner.”
The deceased must have named their spouse as the beneficiary on all investment, banking and retirement accounts as well as life insurance policies and pension plans and created a joint right of survivorship for the property. In this case, there would be no estate to evaluate as all assets have already been distributed to either spouse. If the estate is passing from one generation to another (parent to children), by contrast, then the probate process is typically required in Ontario. Finally, if a financial institution where funds are held demand probate in Ontario, then the probate process is, in fact, required.
Now that you are aware of the probate process in Ontario, as well as how the fees are calculated and what assets are included in it, let’s take a look at the best ways to avoid probate. Whether it means setting up a trust, or creating a joint right of survivorship, there are a number of ways to reduce your probate fees in Ontario.
The best way to avoid the probate in Ontario is to simplify your estate as much as possible before death. This can include giving away money, property, vehicles, investments, and more to family members. In Ontario, the magic number to avoid probate fees is 50,000$. Before that threshold is reached, no probate fees are charged.
The goal of proper estate planning is to maximize the wealth being passed on to your beneficiaries. Rather than forking out 15$ on every 1000$ after 50,000$, there are ways to simplify your estate before going to probate court. Probate court often comes with unforeseen costs and delays that will ultimately come out of the estate itself.
Gifting is one of the most effective ways around probate fees as these assets would not be considered part of your estate anymore. Probate courts, however, will charge taxes on traditional inheritances and treat it as income.
Another effective way to reduce your probate fees in Ontario, or avoid this process altogether, is to name beneficiaries on all your life insurance, pension plans, or registered savings accounts, including TFSAs and RRSPs. Rather than going through the probate process with all your other assets, these funds will typically be transferred directly to your beneficiary. This is especially important when keeping in mind the 50,000$ threshold and offers you the ability to significantly reduce the final probate bill.
Alternatively, you can always transform all your financial accounts into joint accounts with your spouse before death. This would also help bypass the probate process, excluding these assets from the calculation of the estate in probate court. Naming beneficiaries, however, is usually the best way to go, ensuring a smooth transfer of assets from the deceased to the appropriate parties.
Setting up a trust is a strategic way to avoid probate in Ontario and save your loved ones significant time and money. A trust allows you to title assets, which will then be transferred to their respective trustees. The trust itself will take care of the distribution of your assets following your death, providing complete transparency to all relevant beneficiaries.
In this instance, the trust technically owns the property it is set to distribute and it is not considered part of your estate. As a result, no estate means no probate process. Setting up a trust not only helps avoid the costs of probate, but is also one of the most effective, timely, and private ways of distributing your assets in Ontario.
Assets that are held jointly with the right of survivorship are not typically included in the probate process. Instead, they are passed on directly to the joint owner, triggering no additional probate taxes. Naming joint owners, however, could yet have tax implications on the inheritors, including capital gains property transfer tax. Estate accountants should be consulted before undertaking this step, providing you with a comprehensive picture of tax your loved ones should expect to pay.
Naming a joint owner when he or she is not the only beneficiary could also lead to family disputes between heirs. Complete transparency with beneficiaries is recommended to avoid this and keep their expectations in check throughout the estate settlement process.
Seeking professional help from estate administrators is arguably your best bet at avoiding probate in Ontario. Our dedicated team of estate professionals will walk you through the entire process, and ensure the transfer of assets goes smoothly. Avoiding probate not only saves your family time and money, but is also a great way to preserve your loved ones’ privacy.
While there are certain aspects you can take care of yourself, including gifting assets, and updating your list of beneficiaries, there are elements of the probate process that will require estate planning, tax, and probate law experts. Clear Estate can help you plan and settle your estate as well as apply for probate at a third of the price compared to estate lawyers and legal professionals, offering your family transparency, empathy, and expert advice along the way.
Avoiding probate in Ontario is all about being prepared and aware of the landscape you operate in. While it may seem rare to avoid probate, following these steps will ensure that you maximize the wealth retained by your beneficiaries and spare your family time spent in court.
From setting up a trust, to simplifying the estate and naming beneficiaries, avoiding probate boils down to a question of proper estate planning. Clear Estate offers personalized support, offering estate executors and beneficiaries alike access to estate administrators and one-on-one coaching.
Our automated platform simplifies estate planning and estate settlement, and is proven to save you money. In fact, the national average for estate settlement fluctuates between 14 and 18 months. Clear Estate, by contrast, can reduce that timeline to less than a year. If ever you have any other probate questions in Ontario, you can always book a free consultation with Clear Estate or visit our blog for more information before embarking on this process.