If you’ve ever had to settle the estate of a deceased loved one, you likely know what “probate” is.
For anyone else, it’s just legal jargon.
Probate is the process through which a court effectively validates a Will - proving it to be true, accepting that the maker of the Will has died, and confirming that the Will is now a public document. Probate also grants the executor the legal authority to act.
In other words, probate legitimizes a Will in the eyes of the law.
It also avoids problematic situations for institutions like banks. For example, a bank would not like to release funds to an executor pursuant to a 1982 Will of a deceased person presented by that executor, only to have another executor show up three days later with a 2015 Will of the same deceased person! Probate avoids that kind of mess.
So, how does it work?
The executor must apply to court to be granted a “Certificate of Appointment of Estate Trustee With (or Without) a Will”. Notice is given to anyone interested in the Will - usually anyone set to benefit from it.
Also, in order to know the value of the estate, there can be a detailed and sometimes lengthy process of locating all of the assets of the deceased and determining the value they hold. Non-liquid assets such as real estate and jewelry are priced at fair market value with the assumption that they were sold right before the passing of the deceased.
The value of the estate is used in calculating the Estate Administration tax or “probate fees” of roughly 1.5%. This can quickly run into the tens of thousands depending on the size of the estate. However, there are legal strategies for reducing - or even eliminating - probate fees.
Also, the executor may have to put up a bond. That is for another day. There are legal strategies to help the executor - and ultimately the estate - avoid this headache also.
Once all of the legal, valuation and accounting paperwork is in order, the court ensures the Will is valid, and ensures that the executor is still willing and able to act. Then, the Certificate of Appointment of Estate Trustee is issued.
That ends the probate process, and starts the executor’s work.
Among the first things to do - final bills and taxes owed by the deceased must be deducted from the estate. Upon death, its debts before distribution.
These payments can be little, or they can be substantial. For instance, capital gains taxes payable on any real estate that was not the primary residence of the deceased can be rather large, as can be capital gains taxes on any appreciation in the value of stocks held.
To get slightly off topic a little - if a person dies without a Will (that is, “intestate”) in Ontario, probate is still often required. Further, the “debts before distribution” mantra remains in place. Regarding distribution - the Succession Law Reform Act provides that the estate of such a person is to be distributed with the first $200,000 going to a surviving spouse, and the remainder going to the surviving spouse (yes, again) and children. The distribution can change if a dependant of the deceased makes a claim.
So, how about reducing probate fees or sidestepping probate altogether at least for some assets?
Well, there are definitely options for that. They can be a good idea because probate includes a tax on the estate, and makes the Will a public document.
One option is two Wills for one person, with assets intended to be kept out of probate in one of the two Wills.
Another is the joint holding of property, with survivorship rights.
A third is the use of inter vivos trusts - that commence operation while the person with the estate plan is still alive.
A fourth is the gifting of the entire estate to a spouse or similar person using estate planning tools besides a Will.
If you reside in Ottawa or Toronto or any other part of Ontario, and have any questions about the probate process - about how to navigate its complexities, how to handle payments, or how to sidestep it in part or entirely - get started here, at afolabi.law