How to avoid probate fees in Canada - MoneySense (2024)

FAQs

How to avoid probate fees in Canada - MoneySense? ›

By transferring assets into a trust during your lifetime, you maintain control over them while designating a trustee to manage the assets after your death. Since the assets in a trust do not pass through the probate process, they can be distributed to beneficiaries more efficiently—and without a probate cost.

Beneficiary designations: Designating beneficiaries on RRSPs, registered retirement income funds, tax-free savings accounts, life insurance policies and pension plans prevents these assets from passing through your estate and thus avoids probate fees on them.

Joint ownership is the only way to avoid probate for non-registered accounts. A POD or TOD designation allows you to decide to whom the property will transfer or be paid upon your death. As it will be paid or transferred directly to the designated party, it will not be subject to probate taxes.

In Ontario, there is no probate fee for estates with assets up to and including $50,000. For estates of more than $50,000, tax is charged at a rate of $15 for each $1,000 of the estate's value. For example, an estate valued at $500,000 would be calculated as follows.

Your will may not need to go through probate if: You have a small estate—many banks will release assets under a certain dollar amount. If a financial institution agrees to waive a grant of probate (they may require additional protections) If you are a First Nations member who is a resident of a reserve.

Assets that pass by beneficiary designation do not need to be probated, such as Jointly owned bank accounts, RRSPs, RRIFs, TFSAs with a named beneficiary other than 'Estate'. Insurance proceeds paid to a named beneficiary other than 'Estate.

The best way to avoid a lengthy probate process is to have a clear and updated will in place before you pass away. If you don't have a will or if your will is contested, probate comes with financial and logistical issues that can make it harder for your loved ones to not only grieve but also access your assets.

Not all assets require probate.

These assets are known as non-probate assets and include things like: Property held in joint tenancy. Life insurance policies with designated beneficiaries. Registered accounts like RRSPs, RRIFs, and TFSAs with designated beneficiaries.

Bank accounts, like other assets, are generally subject to probate. The specifics, however, can vary depending on various factors. These include the total value of the estate, your state's laws and regulations, and the presence or absence of a valid will.

Which province has the lowest probate fees? ›

Alberta residents are fortunate because the probate fees in Alberta are amongst the lowest in the country, and the maximum is capped at only $525.

Joint ownership of bank accounts

When bank accounts — or other non-registered “liquid” investments — are jointly owned by two spouses, upon the death of one spouse they will ordinarily transfer to the surviving spouse without going into probate or incurring any Estate Administration Tax obligations.

Probate fees are a “tax” that is levied by the government on the value of the estate. The probate fee is calculated as 1.5% of the value of the estate and is payable to the court when applying for certificate of appointment of estate trustee.

The advantage of designating either a successor holder or beneficiary is that the assets in the TFSA can flow directly to the designated successor or beneficiary without going through the estate. This means potential savings on probate fees.

If the estate's value is $150,000 or less, it can be distributed according to the will without going through probate. This is known as a small estate. If there are debts owed, the estate may have to go through probate so that the debts can be paid off before the assets are distributed.

For example, in 2021, if an estate is worth less than $50,000, there are no probate fees or EAT payable. On an estate over $50,000, there are no fees or tax payable on the first $50,000 worth of estate assets. For the remaining estate assets over $50,000, $15 is payable per $1000 value.

The truth is, there is no inheritance tax in Canada. Instead, after a person is deceased, a final tax return must be prepared on income they earned up to the date of death. Any monies owing are paid out from the estate assets before the remaining funds are transferred to the various beneficiaries.

While executor fees are typically set at 5% of an estate's value, this is not a hard and fast rule. As noted previously, fair executor compensation will depend greatly on the size of the estate and how complex the calculation and disbursem*nt of estate assets will be.