Minimizing probate fees requires careful planning

Your death may be the end of life, but it’s not the end of the bills. Aside from burial costs, cleaning up the monthly household bills, the executor of the estate will usually be faced with probate fees.

Probate is the legal process that validates a Will and gives the executor of the estate the legal authority to carry out the terms of the Will.

The process starts with the estate trustee filing documentation to the probate court to validate the Will and pay an estate administration tax, or probate fee. The fee varies from province to province, but generally is a percentage of the value of the estate (see chart).

Depending on the nature of the assets and how the estate was set up, not all Wills have to go through probate. For instance, if the assets of the estate were jointly owned they will pass to the survivor and won’t be part of the estate.

There are ways to minimize probate fees, though they should be carefully planned. First, there are assets that can be left outside of the deceased estate because they are designated directly to beneficiaries such as pensions, a registered retirement savings plan (RRSP) a registered retirement income fund (RRIF) and life insurance.

Trusts can also be set up so that the assets will be dealt with under the terms of the trust rather than form part of the estate. Taking out an insurance policy to cover estate costs is another way to do it.  A person can name his/her estate as the beneficiary.  The estate will pay probate fees on the insurance proceeds, but it gives the estate the cash to cover for the fee, pay debts, taxes and other obligations.

Every situation is unique and it is important that people plan their estate weighing all possible considerations in mind. There are circumstances where probate fees might be avoided or minimized. It may require getting professional help from a financial advisor or lawyer to discuss specific situations and options.

(With files from the Development Office of the Archdiocese of Toronto.)