PROBATE – What is it, and do I need it?

 

Probate is a term that is often thrown around by lawyers and lay people when talking about their wills and estate planning, but it’s often misunderstood. What does it mean? When is it required? How much will it cost? All questions worth answering.

 

First, probate no longer exists in Ontario, or at least, it is no longer called probate. The word probate comes from an Application for Letters Probate, which was the process of submitting the will to court in order to prove the validity of the will. Where a person died without a will, an application for Letters of Administration was made to the court. Today, these applications are called Applications for Certificates of Appointment of Estate Trustee with a Will, or, Without a Will. The new name is more accurate, but hardly rolls off the tongue as easily as probate. As a result, most people, including lawyers, still refer to the process as applying for probate.

 

An application for a certificate of appointment is not always required when someone dies with a will. If someone dies intestate (with no will) an application to court is always required to deal with the assets of the deceased. So, when exactly is it required? The answer, as is so often the case when asking a lawyer, is …“it depends.” It depends on the manner in which the deceased held its assets, and the in some cases depends on the size of the estate.

 

Assets that are held “jointly” will pass immediately to the surviving joint tenant. Similarly, registered investments, life insurance, and pension benefits often allow for the designation of beneficiary, in which case the beneficiary would receive the benefit on death.

 

Assets that are owned solely by the deceased with no right of survivorship and no designated beneficiary will often require the will to be proven in court (or “Probated”) before it can be transferred. Real property is a good example of this. Except where property is held jointly, a court application will be required to transfer title to a home or other real property.

 

Many people put a lot of effort and planning into the avoidance of probate. The reason for this is that the submission of an application to the court triggers the requirement to pay Estate Administration Tax. The fee is $5 per $1,000 on the first $50,000 (.5%) and $15 per 1,000 (1.5%) for the balance of the value of the estate. The tax is fairly modest as taxes go, but adds up quickly on large estates. There are ways of avoiding probate and/or minimizing the taxes paid, but its important to discuss with your lawyer and financial advisors to make sure you have the right plan in place given your unique situation.

 

Matthew Leask is an Associate within the Lancaster Brooks & Welch LLP Wills, Estates, and Corporate department. If you have a question about a will or estate it is best to have someone who can help you navigate the law.

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