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Minimizing Probate Fees - With Care

Many of our clients express concerns about probate fees. A little planning can help minimize these fees and also ensure assets are available to your heirs without delay. However, you also need to weigh the drawbacks of various strategies.

First, it's important to know that probate fees are nowhere near the scale of income or capital gains taxes. Depending on the province, an estate worth $500,000 might be subject to about $7,000 in probate fees.

So what are your options?

• Beneficiary designations. By naming a beneficiary on insurance policies, an RRSP or RRIF, the full value of the asset will go directly to the heir without probate, although the estate will still pay any related taxes. If you name a minor child, additional planning is needed if you don't want the child to gain access to the funds at the age of majority.
• Joint ownership. You could also reregister assets like a home, car or bank account in joint tenancy with right of survivorship, particularly with a spouse. Be aware of the many potential pitfalls of naming a child or other non-spouse person, including the tax implications and potential claims by the joint owner's creditors.
• Living trusts. Investments held in a trust set up during your lifetime will not be subject to probate on your death. With a living trust, you can continue to control the assets for your benefit or the benefit of family members. Among the drawbacks, there are set-up and administrative fees and high tax rates on income not paid out to beneficiaries each year.
• Gifting. Alternatively, you could gift assets outright to loved ones during your life to avoid probate. Like living trusts, a gift may trigger capital gains tax and certain income on investments gifted to minor children or a spouse may continue to be taxed in your hands under the attribution rules. Most important, before making a significant gift, you need to ensure you've left yourself enough assets to last your lifetime.

Strategies to minimize probate fees should be considered as part of your overall estate plan. For a review of your plan and retirement needs, please call us for an appointment.

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