Effectively Reducing Your Probatable Estate
To probate or not to probate; that is the question. The most common mistake uncovered through the Estate Planning process revolves around a treasured Canadian pastime of trying to avoid probate taxes. Although plans are made with good intentions, the end result is often more detrimental to beneficiaries than if nothing was done at all. So what is the true motivation? Probate taxes range from one province to another. For the most part, residents of Ontario, British Columbia and Nova Scotia have the greatest motivation to reduce probate taxes. Residents of Alberta, Quebec, Newfoundland and the Territories really do not have much to be concerned about as their rates are rather insignificant in the big picture. So it is safe to say the first step in reducing the need for probate is to determine what the cost savings potentially are. As with every decision, there are pros and cons to be considered, and with the case of probate, it is often which choice is the lesser evil.
So what exactly is probate? Probate is a legal process by which the executor is confirmed and the will is validated by the court. Effectively this protects both the beneficiaries and executor by having a record of Probate.
5 General Strategies to Reduce Probate
1.Designate Beneficiaries Pro – Assets with designated beneficiaries are not included in the probateable estate Con – inequalities in estate distribution amongst beneficiaries will arise unless properly addressed
2.Joint Ownership Pro – Assets held jointly with right of survivorship will pass outside your estate Con – joint assets will be subject to legal (divorce) and creditor claims of the joint owner(s)
3.Giving it Away Today Pro – Assets not held in your name are therefore not included in your estate Con – Gifting assets could result in taxation due to capital gains and may leave recipients paying more than what is saved in probate fees
4.Establish Multiple Wills Pro – In some provinces, a supplemental Will can be created for privately held companies which may not be subject to probate Con – If not created properly, the supplemental Will could revoke the primary Will
5.Establish Trust Pro – An Alter-Ego Trust or Joint Partners Trust are not subject to Probate on the death of the primary beneficiary. Con – Increased professional fees over time may exceed the cost of probate
Developing an effective and efficient Estate Plan is often not as simple as it seems and requires professional help. For that reason, an Estate plan is a key component of the Northland Wealth Planning process. For more information on Estate Planning please contact our office.