Probate FAQ

What is probate?

Probate is a legal process to distribute a deceased person's estate.  It includes:

• applying for Letters Probate to prove in court that the deceased's will is valid (usually a routine matter)

• identifying and drawing up an inventory of the deceased's property

• having the property appraised

• paying debts and taxes, and

• distributing the remaining property as the will directs.

Probate normally involves paperwork and court appearances by lawyers. The lawyers and court fees are paid from the estate property (which would otherwise go to the people who inherit the deceased person's property).  Probate fees range from .5% to 1.5% of the estate's assets, depending on the size of the estate and the province or state.   Probate fees are calculated on assets, regardless of liabilities, so an estate with assets of one million dollars and liabilities of $200,000 would pay probate fees on the entire million.  In addition, if these same assets are transferred to your spouse, probate fees would be due again the second time around when the assets were transferred through your spouse's will.  There may be increased fees if a lawyer is retained to cross-examine the asset list or if the executor charges a percentage of the assets to do the work.

After your death, the executor you named in your will (or, if you die without a will, the person appointed by the probate court) files papers in the local probate court to prove the validity of your will and presents the court with lists of your property, your debts, and who is to inherit what is left and relatives and creditors are officially notified of your death.

Your executor must find, secure and manage your assets during the probate process, which commonly takes about a year. Depending on the contents of your will, and on the amount of your debts, the executor may have to decide whether or not to sell your real estate, securities or other property to satisfy cash bequests or to pay outstanding debts.

In some provinces and states, immediate family members may ask the court to release short-term support funds during the probate proceeding. Once the court has granted your executor permission to pay your debts and taxes, your property can be transferred to your heirs.

LeanLegal will be providing a detailed tutorial on probating estates in the near future.   If you would like to be notified when this information is available please sign up for our free e-mail newsletter LeanLegal Briefs.

Does all property have to go through probate when a person dies?

No.  Most provinces and states allow a certain amount of property to pass free of probate, or through a simplified probate procedure. In addition, property that passes outside of your will  through joint tenancy or a living trust is not subject to probate.  Probate is time consuming, expensive and usually unnecessary, so many people plan in advance to avoid it.  Probate is generally necessary in cases where:

• a bank, trust company or other financial institution insists on the will being probated to prove that the executor has the authority to act.

• the assets include shares owned in a private company

• the executor needs to sue an individual owing the estate money

• there are creditors due money from the estate

• the terminology of a will is unclear, ambiguous or certain provisions are not stated (For example, there is no provision to pass assets to another heir where a spouse has predeceased you)

• a will is improperly witnessed

Who is responsible for handling probate?

The executor named in your will.  If there is no will or the will fails to name an executor, the probate court appoints someone to handle the process.   It is usually the closest capable relative or the person who inherits the bulk of the deceased person's assets.

If no formal probate proceeding is necessary, a close relative or friend may serve as an informal estate representative or several people may share the responsibilities of paying debts, filing a final income tax return and distributing property.

Should I plan to avoid probate?

Probate rarely benefits your beneficiaries, and it always costs them money and time.   Probate makes sense only if your estate will be complicated, e.g. many debts that cannot be easily paid from the property you leave.

Your age, health and wealth should impact how much time and effort you spend planning to sidestep probate.  If you are young and in good health, a simple will may be all you need.  If you adopt a complex probate avoidance plan early on, you may have to redo it as your situation changes.   If you have very little property, your property could fall under your provincial or state probate exemption.  Most provinces and states allow a certain amount of property to pass free of probate, or through a simplified probate procedure.

If you're older, in ill health or own a significant amount of property, you should plan and implement a plan to sidestep probate.

What are the different ways I can avoid probate?

There are a number of ways to pass property to your inheritors without probate.   Some of these methods are  simple while others take more time and effort.  No one probate-avoidance method is right for all people.  Your choice of method should depend on your personal and financial situation. Here are some common techniques to consider:

Pay-on-death designations

Designating a pay-on-death beneficiary is a simple way to avoid probate.  You simply name someone to inherit the property at your death. You retain complete control of your property when you are alive, and you can change the beneficiary if you choose. When you die, the property is transferred to the person you named, free of probate.

Joint tenancy

Joint tenancy with right of survivorship is a form of shared ownership where the surviving owner(s) automatically inherits the share of the owner who dies. Joint tenancy is often a good choice for couples who purchase property together and want the survivor to inherit.  Be careful when adding another owner to your property in order to implement this plan, because the new co-owner can sell or borrow against his or her share!

A living trust or inter vivos trust

A revocable living trust is a popular probate-avoidance device. The trust is created by preparing and signing a trust deed or document and transferring property into the name of the trust, without giving up any control over the trust property.  When you die, the trust property can be distributed directly to the beneficiaries you named in the trust document, without the approval of probate court. 

LeanLegal will be providing a detailed tutorial on estate planning, the rationale behind establishing trusts and other related matters in the near future.   If you would like to be notified when this information is available please sign up for our free e-mail newsletter LeanLegal Briefs.

Insurance, RRSP's and RRIF's or CD's and IRA's

If you buy life insurance, you can designate a specific beneficiary in your policy. The proceeds of the policy won't go through probate unless you name your own estate as the beneficiary.

Name beneficiaries on your RRSP's and RRIF's or CD's and IRA's.  To protect themselves, banks and trust companies may require probate or a letter of indemnity from the estate's lawyer if these assets are over $30,000.   If your spouse is your beneficiary, consider a secondary beneficiary, in case your spouse dies at the same time you do.

Gifts

Anything you give away during your life doesn't have to go through probate.  Make nontaxable gifts of up to $10,000 per recipient per year if you can afford it.

LeanLegal will be providing a detailed tutorial on probating estates in the near future.   If you would like to be notified when this information is available please sign up for our free e-mail newsletter LeanLegal Briefs.

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