The Courts can certify the validity of a will and this process is known as probate. It ensures the executor has the legal right to distribute the assets to the beneficiaries. The Ontario legislation does not refer to “probate,” rather they use the term – estate administration tax. However, probating a will is not a legal requirement and it is fairly straightforward to avoid paying the related fees. This raises a fundamental question – if probate is not a legal requirement, it results in a significant level of fees and it may result in the will being made public, why would one ever want to go through the probate process?
The answer to this question will determine a significant component of an individual’s estate plan.
Part One – Background information on probate fees.
Part Two – In next month’s update, we shall outline strategies to avoid having a will probated and thereby saving the related fees.
The term “probate” refers to the process by which a court reviews the will of the deceased and declares it to be official. Each province levies a probate fee, the amount of which is determined by the size of the estate. For example, Ontario levies a fee of $5 per $1,000 on the first $50,000 of the estate and $15 per $1,000 on the remainder of the estate. There is no maximum probate fee. An Ontario estate of $1,000,000 would result in the following probate fee:
First $50,000 $ 250
Remaining $950,000 $14,250
In addition to the fees paid to the Ontario government, individuals will incur legal costs to have their will probated in court. Although legal representation is not a requirement, it is highly recommended. Another negative consequence of having a will probated is that the will or related documents may become public.
The most common reason to go through the legal process is that a financial institution may not release the funds until the executor produces proof of probate.
Consider the following example. Bart has $100,000 GIC in the Bank of Montreal when he dies and the will states the funds will be left to his son Frank. In order to have the bank release the funds, the financial institution must be satisfied that the executor has produced a current and valid will. Bart may have written multiple wills over time and the bank wants to ensure it only releases the funds to the individual designated in a valid will, so they may take the position that unless the will is probated, the funds will not be released. In such cases, the executor has no choice but to go through the patent process.
Other reasons to have a will probated include:
- The will may have a stipulation that the executor must have the will probated
- If real estate is transferred to someone other than a surviving spouse, probate is recommended
- If there are technical problems with the will, such as no witnesses or it was not signed, the probate process can resolve these issues
- The executor may want the will probated to eliminate any potential legal risks as he performs his function.
If all of the assets are left to a surviving spouse, it is common not to have the will probated.
If an individual takes certain steps prior to death, the probate process can be avoided. However, there are risks involved if such strategies are implemented. These strategies will be reviewed in the next update.