You may believe that if you have a will and an executor, all of your assets must go through probate before being distributed to your beneficiaries. This is not true. However, this is not always the case. Probate is required in some cases but not in others.
There are numerous myths surrounding probate that make it difficult to distinguish between fact and fiction. Well-meaning friends and family members will frequently offer advice based on their own experiences, which may or may not apply to your situation.
We will make an effort to simplify and clarify the topic of estate administration in Ontario. This should help you make more informed decisions about estate planning or executor responsibilities. Keep in mind that this is merely a summary and does not constitute legal advice.
The Meaning of “Probate”
Probate is the legal process of administering a deceased person’s estate. The term “probate” refers to the legal process of appointing a legal representative and paying estate taxes. Probate procedures, for starters, formalize the orderly transfer of assets between generations. With it are probate fees which are levied on estate assets distributed to beneficiaries.
Moreover, letters of administration, also known as “letters probate,” are legal documents that name an executor or administrator of an estate. In Ontario, it is now known as an Estate Certificate.
In Ontario, probate fees are known as Estate Administration Taxes (EAT), which is calculated as a percentage of the Estate’s assets’ value. This is a provincial tax, not a federal one. Because Ontario has one of the highest estate taxes in Canada, it’s a good idea to plan ahead.
Probate in Ontario
In Ontario, probate is required if an estate certificate is needed to collect, distribute, transfer, or manage the estate.
Certain assets may or may not require probate, depending on their ownership structure or beneficiary designations. The same goes for life insurance. The estate does not include a life insurance policy with a beneficiary or beneficiaries.
The estate’s size is also significant. Estates worth less than $150,000 can be probated through the small estate court procedure; otherwise, the more involved application for estate certificate procedure must be used.
Assets Subject to Probate
Provable assets in Ontario include real estate properties in the province of Ontario, bank accounts, investment vehicles, property held in the name of someone else, tangible personal property, intangible property, business interests, and insurance. For probate purposes, a mortgage or secured loan would be noted and deducted from the asset’s value.
Probate may be held in Ontario or elsewhere in Canada, depending on the jurisdiction. It is possible to have a local attorney handle this for you, and executors of distant estates frequently appreciate having local counsel available.
Assets Exempted from Probate
If an estate asset is held jointly with a spouse or has a designated beneficiary, it is frequently possible to transfer it without going through probate. In general, property held jointly with someone other than a spouse does not have a right of survivorship, so it is not subject to probate.
Avoiding Probate in Ontario
Probate can be avoided or reduced significantly. Each method has several disadvantages and should not be used without first seeking legal or tax advice. Paying the probate fees rather than attempting to reduce them makes more sense logistically and tax-wise.
Co-tenancy, trusteeships, transfer of business assets and stock, beneficiaries, and wills are some of the legal tools that can help you maximize your estate.
Don’t wait until it is too late to avoid or reduce probate after death. This is why estate planning, or the examination of one’s assets and liabilities with the goal of transferring wealth from generation to generation, is a worthwhile endeavour.
Note that the process of obtaining an estate certificate is so complicated that the Ontario government website recommends that you “seek legal advice from a lawyer.” Most people do not think about estate planning until they are forced to, and dealing with an estate is often an emotional experience.
Are you looking for an estate planning attorney? Ontario Wills can offer you top-notch estate planning services through the convenience of video calls with extended hours. With us, your estate plan can be arranged smoothly from the base of your home. Work with us today!