Probate is the legal process of validating a will or appointing an estate administrator to distribute an intestate estate. Probate isn’t always required, but when it is, the estate incurs fees, and the settlement process may take longer to complete.
Unfortunately, it’s a process many people don’t think about–or prepare for–until they’re faced with the death of a loved one.
In this article, we’ll cover everything from wills and probate in Ontario to key strategies on how to avoid probate or minimize probate fees.
What is probate, and why avoid it?
Probate is the legal process of validating a will through the court system after someone passes away. It grants the executor—the person responsible for managing the estate—the legal authority to distribute the deceased’s assets. While probate is an important legal step, it can be time-consuming and costly, which is why many people try to avoid it.
The primary reasons to avoid probate in Ontario include:
- Potential for high probate fees: Probate fees in Ontario are calculated based on the gross aggregate value of the deceased’s estate. The current rate is approximately 1.5% of the estate’s value, which can add up if your estate is of higher value.
- Delays: Probate can take months or even years to complete, delaying the distribution of assets to beneficiaries.
- Public process: When a will goes through probate, it becomes part of the public record. This means details about the estate and its value can become publicly accessible.
Can you settle an estate without going through probate in Ontario?
Yes, in many cases, you can. Probate may be avoidable if your estate is valued under $50,000, if you don’t solely own any real estate, or if you have assets that are jointly owned or have designated beneficiaries.
Understanding Probate fees in Ontario
Probate fees, also sometimes referred to as estate administration tax or probate tax in Ontario, are calculated on the total value of the deceased’s estate. This tax is calculated as follows:
- No probate fees for the first $50,000 of the estate’s value.
- 1.5% probate fees on amounts over $50,000.
Remember, the estate pays these fees. Since they can be significant, it’s important to learn how you can avoid them, where possible.
Strategies to avoid probate in Ontario
Make a will
Without a will, an estate is required to go through probate. Making a will is the most important step you can take to increase your estate’s chances of avoiding probate. Should probate become necessary later down the line, appointing an executor in your will now ensures your loved ones will have someone you trust to handle the process.
Start your will for free in Ontario →
Set up joint ownership
One of the simplest ways to avoid probate in Ontario is through joint ownership. When assets such as property or bank accounts are jointly owned with rights of survivorship, they pass directly to the surviving joint owner upon death.
This means the assets bypass the estate and don’t need to go through probate. This can decrease the overall value of your estate, which may increase the likelihood it will avoid probate fees.
Does a house have to go through probate in Ontario?
If your house is jointly owned or placed in a trust, probate is not required. But if you solely own your house in Ontario, it will likely need to go through probate.
How do I avoid probate on my bank account in Ontario?
One way to avoid probate on assets like your bank account is to add a joint owner to the account.
Common types of assets that can be jointly owned include:
- Real estate (like a home, cottage, office, etc.)
- Bank accounts
- Investment accounts
Appoint beneficiary designations
Another powerful tool for avoiding probate is to designate beneficiaries on certain types of assets. Assets with beneficiary designations include:
- Registered Retirement Savings Plans (RRSPs)
- Registered Education Savings Plans (RESPs)
- Tax-Free Savings Accounts (TFSAs)
- Life insurance policies
- Pension plans
Upon your death, these assets are transferred directly to the designated beneficiary, avoiding probate altogether.
It’s important to make sure your beneficiary designations are up to date. Changes in your marital status or the death of a beneficiary may require you to update your beneficiary designations to make sure your document wishes are still accurate.
Start an inter vivos trust
An inter vivos trust, commonly referred to as a living trust, is another way to shelter your assets and avoid probate.
This type of trust is created during your lifetime and allows you to transfer ownership of assets to a trustee, who then manages the assets on behalf of your chosen beneficiaries.
Assets in this type of trust are no longer in your name at the time of your death, so they do not need to go through probate.
Living trusts can be complex and may require professional legal assistance to set up.
Learn more about living trusts →
Gift assets before death
Another option is to gift assets as part of an early inheritance. By distributing assets like cash, property, or personal belongings to your loved ones while you’re still alive, you ensure those assets won’t be included in your estate. This means they won’t be subject to probate fees.
You’ll also benefit from experiencing the impact your inheritance has on your loved ones.
Before gifting assets, remember to consider the following things:
- Tax implications: Some gifts may have tax consequences, such as capital gains tax.
- Loss of ownership: Once you gift an asset, it’s no longer yours. You can no longer dictate what happens to it, who uses it, or how it’s maintained.
Legal considerations and risks
While avoiding probate can save time and money, it’s not without risks. Some strategies, such as joint ownership or gifting assets, can have unintended consequences. For instance:
- With joint ownership, any debts you have on those assets are shared with your co-owner and vice versa. You also don’t have sole decision-making power, because you share the assets with another person.
- Gifting assets early could lead to family disputes or potential tax liabilities.
Expert tips on estate planning
Effective estate planning is about more than just avoiding probate. An estate plan ensures your wishes are documented, and your family has what they need to settle your estate.
Tip 1: Keep your estate plan current and add backups
Life changes. Your marital status might change, you might welcome a new member into your family, or you may say goodbye to a loved one. Your estate plan, which includes your will, power of attorney documents, asset lists, and more, should change with you.
Failing to update your documents can result in unintended consequences, such as assets going to the wrong person or roles going unassigned.
“Including backups (and backups to backups) to executors/guardians/beneficiaries ensures a will can last through life changes and not leave gaps when it needs to be used,” advises Scott B. Allison, a Wills and Estate lawyer based in Ontario.
Willful makes it easy to add backups for each role, and also provides free unlimited updates, so you can edit your documents as often as you want.
Tip 2: Make sure your documents are safe
Keep your original documents in a safe and secure place, somewhere you or your executor can easily access them if needed. This ensures that your will be located when the time comes.
If your will is damaged beyond legibility or cannot be found, you will be considered to have died without one.
Tip 3: Communicate your wishes both verbally and in writing
It’s important to communicate your estate planning decisions to your loved ones. This helps prepare them for the future and prevent misunderstandings and disputes after your death.
Help your estate avoid probate today
Now you know about different types of probate exemptions in Ontario and how to prepare your estate if probate may be required for any of your assets.
The next step is to start your Ontario estate planning journey and make your will from the comfort of your home with Willful. Plus, with free unlimited updates, you can make changes whenever you want.
