Continuing Education for Financial Service Professionals
Probate Planning
Probate Planning Copyright Š 2015 CLIFE Inc. All rights reserved. Any reproduction of parts or all of this course and its contents by any means electronic or mechanical is prohibited.
& The information in this book is provided for educational purposes only; it should not be construed or interpreted as providing advice. Agents and advisors should always seek guidance from their principals and compliance experts in regards to informing themselves and others about details of the products they sell and other considerations of their business.
& We welcome all feedback and suggestions for additions to the book. Please send your comments to info@clifece.ca. CLIFE INC. 1595 Sixteenth Avenue Suite 301 Richmond Hill, ON L4B 3N9 www.clifece.ca
Probate Planning provides continuing education credits upon satisfactory completion of an online test. Please see the website for details or email info@clifece.ca.
Table of Contents
Introduction
4
Probate in Canada Probate for Canadians Who Own U.S. Property The Probate Schedule in Dollars
6 8 9
Probate: What It Does and Does Not Do Who Can Request Probate
10 10
The Probate Procedure
12
What and When What is Subject to Probate When Probate is Required
13 13 13
Essential to Probate Asset Inventory Asset Valuation
15 15 17
Planning Opportunities to Reduce Probate Will Power A Will Power B Alter-Ego and Joint Partner Trusts Joint Tenancy with Right of Survivorship Funeral Prepayment Spend, Spend, Spend or Give It Away Debt Payment Insurance and Annuities An Insurance Trust Designating Beneficiaries
20 20 21 24 28 29 30 30 31 32 33
Conclusion
35
Introduction
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Financial planners and advisors concentrate their professional skills
on wealth preservation and accumulation until the matter of probate arises. Here is one area in which the objective is to diminish estate value. This is so that assets that will be subject to probate have the lowest possible value, and less is paid in probate fees. -
It can be fairly said that planning for probate runs contrary to all other
aims of financial planning! -
Remedies are available for the purpose of paying less probate. So,
why not use them to pay less rather than more? Not to be Confused with Tax -
Pro
bate is an entirely separate process and fee structure that has nothing to do with income tax. The only common ground between probate and income tax at death is that they are both concerned with a person who is deceased. -
Thi
s course addresses how probate fees can be reduced; reduction of income tax after death is a separate issue beyond the scope of this course. Probate Specified -
Probate fees are the charge against assets when Letters Probate are
issued by the court. The term used to describe probate and Letters Probate varies between provinces, just as the rate charged varies. However, in this
Course, we will use “probate� as a general term to describe the charge and the document since the word is universally understood and applied to both. Need for Context -
Probate planning is part of a broader estate and financial planning
exercise. It should encompass the goals and objectives of the client, and will involve data collection and analysis to make recommendations as to the most desirable way to proceed. When a plan is accepted it should be implemented and monitored periodically. -
Within the scope of an estate and financial plan, probate tax should
be addressed in the context of its relevance, the solutions available, and the cost and desired outcome of implementing the recommendations. -
Probate planning is complex and it is recommended that when some
of the more aggressive tactics, such as multiple wills, are being considered that legal and tax professionals be involved.
Probate in Canada -
Although it is not termed as such, probate is a tax. It applies to the
residents of all provinces except Quebec. o
In Alberta, there is a $400 cap on probate fees thus rendering
planning to reduce probate fees of little importance. However, if assets exist in more than one province, probate fees may be charged in each. There is no reduction for fees paid in another jurisdiction. o
Probate tax is distinguished from inheritance tax since probate is
charged to the estate and inheritance tax is charged to inheritors. There is no inheritance tax in Canada. -
The purpose of probate has not changed since it came into existence
in England in the 15th century: it determines that the will of a deceased is valid. -
Originally, the fee charged was to help pay court costs in making that
determination and they were based on the value of the property under a will. -
That fact has not changed over the centuries: probate is still based
on the value of the estate. However, it is no longer associated with a reimbursement of court costs. -
Probate fees are levied in each province in which property is owned
except Quebec. Therefore, an Albertan who owns vacation property in BC may face probate fees in BC for that property. -
In Saskatchewan, the application form for probate must include all
assets regardless of whether the asset or assets flow through the estate.
o
It is the only jurisdiction in which the death benefit of life insurance
with named beneficiaries must be disclosed even though it does not form part of the estate. -
The following schedule is current as of March 2015; fees change
constantly and advisors should always check applicable provincial rates. Jurisdiction British Columbia
Saskatchewan
Probate Fee Schedule $0 for estates < $10,000. $200 for estates between $10,001 and $25,000 $6 for every $1,000 or part of $1,000 by which the value of the estate exceeds $25,000 but is not more than $50,000 Plus $14 for every $1,000 or part of $1,000 by which the value of the estate > $50,000 $25 for estates < $10,000. $100 for estates between $10,000 and $24,999 $200 for estates between $25,000 and $124,999 $300 for estates between $125,000 and $249,999 $400 for estates > $250,000 $400 maximum $7 on each $1,000 (or part thereof)
Manitoba
$70 for the first $10,000, plus $7 for every $1,000 thereafter
Ontario
$5 on each $1,000 for the first $50,000 and $15 per $1,000 thereafter $95 for non-notarial will 0 for notarial wills (notarial wills do not need to be probated) $70 for estates <$10,000 $10,000 - $25,000 = $176 $10,000 - $25,000 = $176 $25,000 - $50,000 = $293 $50,000 - $100,000 = $820 $820 for estates > $100,000 Plus $13.85 for each additional $1,000 of fraction thereof in excess of $100,000 $25 for estates < $5,000 $50 for estates between $5,000 and $10,000 $75 for estates between $10,000 and $15,000 $100 for estates between $15,000 and $20,000 $5 per $1,000 for estates greater than $20,000 Plus $40 for estates less than $20,000 and $2 per $1,000 for estates greater than $20,000 $50 for estates not exceeding $10,000
Alberta
Quebec Nova Scotia
New Brunswick
Prince Edward
Island
Newfoundland and Labrador Northwest Territories and Nunavut Yukon
From $10,001 to $100,000 progressive to $400 plus an additional $4 for each $1,000 (or portion thereof) over $100,000 There is also a 0.2% closing fee. $85 for the first $1,000 and $5.00 per $1,000 thereafter Plus $50.00 for the Order < $10,000 = $25 $10,000 - $25,000 = $100 $25,000 - $125,000 = $200 $125,000 - $250,000 =$300 > $250,000 = $400 < $25,000 in value = 0 > $25,000 in value = $140
Probate for Canadians Who Own US Property -
If a Canadian owns property in the US, he may be subject to US probate even if his estate has been probated in Canada.
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Some US probate is expensive and time consuming: attorneys in Florida are permitted by law to charge up to 3% of the fair market value of US assets as a probate fee. o Fees vary on a state-by-state basis. o California has a sliding scale probate charge in which probate fees increase in step with estate value.
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Title to property may not be able to be transferred until probate has been satisfied in both Canada and the US.
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