Probate: Why Do People Try To Avoid It Like The Plague?

Probate is the procedure in which the will is validated as the last will of the deceased. It also legally confirms and grants the executor named in the will with the authority to deal with the estate. This provides proof to third parties (often financial institutions), that the executor has authority on the accounts and it also confirms the trustee.

Probate used to be considered a fee, until the provinces amended it to a tax. It is not considered probate tax anymore in Ontario but people still call it that even though it is now officially EAT.

The amount of EAT will vary from province to province. Some assets don’t need probate to be transferred, such as joint accounts. They generally get transferred to the surviving account holder. Life insurance policies, and registered retirement savings plan, registered retirement income fund and tax free savings accounts that have named beneficiaries, will also pass outside the estate, making probate unnecessary for them.

Five ways to be happy despite your EATing problem. How to EAT less:

  1. Use beneficiary designations on all the accounts you can such as RSP, RIF, TFSA, insurance policies etc.
  2. Gift your money or assets before you get taxed on them, but watch out, as once you do this you have given up control of them.
  3. Transfer ownership of certain assets to an inter-vivos trust to be distributed after you die.
  4. Use multiple wills; a primary will for probatable assets, and a secondary one for assets of your corporation or nonprobatable assets.
  5. Joint accounts where assets pass to another with the right of survivorship. If you are considering adding a child as joint ownership to your home, get professional advice to set up a Declaration of Trust that says there is “no change of beneficial ownership and children have no beneficial ownership in the house”. Take caution appointing your child as joint owner of your bank account or other assets. Once you die and get your wings, that child may feel entitled to it and not want to share the value of that asset with the other children as was supposed to happen.

A last word of caution here: Don’t aim to empty your estate by flowing all of your assets out of it to avoid EAT as it often creates conflict among your beneficiaries.

Beware Of A Common Property Transfer Danger

Making accounts and property jointly held is a common way to avoid probate. But sometimes it will cost you much more than you hoped to save. I consider this one of the DIY duct tape solutions to avoid. Like anything, if you take free advice you will get what you paid for and, in my experience, most bad advice is given with the best intentions. Remember the saying the road to hell is paved with good intentions? You need to get proper legal and tax advice for your situation.

Most people don’t understand that property transfer is not just about splitting the asset but also about the legal right of survivorship. The joint asset with right of survivorship will not form part of your estate when you die and thus not be included in probate. But doing so can create a bigger issue. People have been burned putting assets in joint ownership. Depending on the nature of the joint agreement some have lost the entire asset when the joint owner redeems all the money. But it doesn’t have to be malicious; you can trust the person entirely and still get burned.

Where Canadians Get It Wrong

Probate fees are negligible compared to income and capital gains tax so worry more about the higher tax you can mistakenly trigger and loss of control of your asset, not a minor amount of probate.

The bottom line is you lose control. Your son, who has joint ownership of your home, gets sued or divorced and now his creditors have claim to his portion of your home, or his wife, who you never really liked anyway, now owns 25 percent of your house, because it is included as matrimonial property. At this point you would have been glad to have paid the probate to avoid this mistake.

Any time you consider joint assets you need to get professional tax, legal and financial advice to explore whether you are exposing your assets to risk.

If you would like to sit down for one hour we can go through a process of discovery and uncover what your concerns are. Reach out to me at and we can have a conversation.

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