Did you know that probate costs Canadian families millions each year?
Wills and powers of attorney documents are essential parts of your estate plan, but preparing for probate is also important.
Probate is the legal process of validating a deceased person’s will and giving the executor a grant of probate so they can settle an estate. If there is no will, the probate courts would also be responsible for appointing someone to act as the deceased’s estate administrator.
While probate can be helpful for authenticating a will and settling an estate, many Canadians try to avoid it because it leads to probate fees, longer estate settlement times, and a lack of privacy.
In this article, we’ll discuss effective probate avoidance strategies and estate planning tips, the difference between avoiding probate and avoiding probate costs, and more.
Reasons to avoid probate
1. Probate takes time
Probate in Canada can take months or even years to complete, depending on the complexity of your estate and the capabilities of your executor.
The executor is responsible for keeping beneficiaries informed on the settlement process and any issues with the estate or the probate process.
2. Probate often comes with probate fees
Probate fees in Canada can be costly as they are proportional to the value of your estate. Since the fees are paid by the estate, they may be deducted from assets you had otherwise intended for your beneficiaries.
3. Probate records are public
When a will goes through probate, it becomes a public record. This means private information, such as the assets in your estate and their distribution, becomes accessible to anyone.
This is one reason why there are some things you should never include in your will.
Is there a way to avoid probate in Canada?
Yes, Canadians can avoid probate and reduce probate fees by using strategies such as making a will, joint ownership in Canada, designating beneficiaries, and creating a living trust.
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Strategies to avoid probate
Make a will
Did you know that 1 in 2 Canadians don’t have a will? Without a will, your estate is required to go through probate.
By making a legal will, you give your estate a better chance of avoiding probate. Your will also simplifies the estate planning process for your executor, regardless of whether probate is required.
If you’re in a common law relationship, it’s especially important to make a will. This ensures your loved ones won’t be ignored by inheritance laws and that they receive the inheritance you intend.
Learn who automatically inherits your estate if you don’t make a will →
Co-own with right of survivorship
One of the simplest and most popular probate avoidance strategies is joint ownership with the right of survivorship.
If you jointly own assets with someone else, such as bank accounts and real estate, those assets will automatically transfer to the surviving owner if you pass away.
It’s not quite an estate transfer without probate, because these assets will not be considered part of your estate. However, passing assets through the surviving owner helps keep the value of your estate lower and decreases your estate’s chance of incurring probate fees.
Important things to consider about joint ownership
- Assets that typically qualify for joint ownership can include things like real estate, bank accounts, and other financial assets
- Your co-owner must have rights to survivorship for them to automatically inherit your co-owned assets
- Adding someone as a joint owner gives them equal control of the assets while you’re alive, which can have legal, tax, or debt implications
Add beneficiary designations on registered accounts and insurance policies
Have you named a beneficiary on your RRSP, TFSA, life insurance, or pension plan? If not, you should!
Naming beneficiaries on certain accounts and policies is a straightforward way to avoid getting them stuck in probate.
When you designate a beneficiary on these types of assets, they bypass probate and go directly to the named person.
If you don’t name beneficiaries, the assets will dissolve into your residual estate, which increases your estate’s chances of incurring probate fees if probate is necessary.
Create a revocable living trust
A revocable living trust can help keep your assets away from probate.
You can create a living trust, also called inter vivos trust, when you’re still alive, and then continue to manage the assets within the trust throughout your life.
When you pass away, the trust assets are distributed to your trust beneficiaries based on how you’ve set up your trust. This occurs completely outside of the probate process because the trust is separate from your estate.
What is the best trust to avoid probate?
A revocable living trust is a common type of trust Canadians use to help them protect their assets from probate and more. It allows you to manage assets while alive and pass them directly to beneficiaries upon death without probate fees or delays.
Gifting assets during your lifetime
We often think about giving gifts to others only on special occasions, such as birthdays, anniversaries, or the winter holidays.
But you don’t have to limit yourself to special occasions, nor do you have to wait until you’ve passed away to leave something to a loved one.
If you give assets like property, vehicles, or cash to others while you’re alive, you can reduce the size of your estate and avoid the need for it to go through probate in the future.
Key things to consider when planning early inheritances
- Tax implications: Beneficiaries of inheritances in your will aren’t subject to inheritance tax. However, living inheritances can have tax implications, especially if the gift is considered income or a significant capital gain.
- Conflicts with your will: If you make a gift during your lifetime, make sure to update your will accordingly! Checking and updating your will once a year is a great practice, especially if you have a Willful will and get free unlimited updates!
- Proper documentation: Some gifts, especially high-value ones, may still need formal documentation to avoid legal disputes among beneficiaries later
Legal considerations for probate avoidance
You must make sure you’re making a valid legal will in your province. Each province in Canada has different requirements for what makes a legal will.
There are four different types of legal wills you can make:
- A holographic (handwritten) will
- A will with a will kit
- An online will
- A will with a lawyer
All of these wills are legal in every province in Canada, with the exception of holographic wills, which are not legal in British Columbia or PEI.
To make your will legal, it must be:
- Created, signed, and witnessed according to the requirements of your province
- Created while you are of sound mind and of the age of majority (with a few exceptions)
Learn more about the requirements of a legal will in your province →
If you have any questions about making a legal will in Canada, you can reach out to our expert support team here or by clicking the blue chat icon on the right side of your screen →
Common misconceptions about avoiding probate
There are many myths surrounding probate in Canada, which can lead to misunderstandings about effective probate avoidance strategies.
Myth 1: Having a will avoids probate
A will alone does not guarantee your estate will avoid probate, but it can reduce the likelihood. Probate may still be required if you have a large estate, solely-owned property like a home, or if your executor requires a grant of probate to access your bank account.
If someone believes your will is not authentic or has other issues, it can be contested. Any type of will can be contested, including those drafted by lawyers.
If contested, the will would have to go through probate to be validated.
Myth 2: All assets are subject to probate
Assets that generally bypass probate include jointly owned properties, RRSPs, TFSAs, and life insurance policies with designated beneficiaries.
Plus, any assets you give away before you pass will not be considered part of your estate, nor would any asset that you place in a living trust.
Myth 3: Probate fees are paid out of pocket by the executor
Probate fees are paid by the estate, not the executor. This means fees would be deducted from your own assets to cover the costs of probate.
Case studies and real-life examples
To better understand how these strategies work, here are some examples of Canadians who successfully avoided probate.
When probate may still be necessary
In certain cases, probate may be unavoidable. Here are some circumstances that might require probate:
- An institution requires a grant of probate: In some cases, banks and other institutions holding the deceased’s assets may require a grant of probate before they can transfer these assets to the executor.
- Disputed wills: If a will is contested, it will need to go through probate to be validated.
- Solely-owned real estate: As high-value assets, solely-owned real estate often requires probate.
- High-value estates: Probate is often required for larger or more complex estates. It ensures the will is valid and protects beneficiaries, creditors, and other stakeholders.
Planning for probate with Willful
Making a will is the first and most important step to helping protect your estate from probate.
Hundreds of thousands of Canadians trust Willful to create a legal will and other estate planning documents today.
Plus, Willful wills come with free unlimited updates, so you can change and update your will anytime you want.
