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Estate Planning and Probate Fees

Many people want to avoid “estate taxes”, or probate fees. Sometimes, this will be attempted by putting bank accounts or real estate into joint names, where a right of survivorship causes the asset to vest entirely in the name of the survivor (often a child) on the death of the owner of the asset.

Usually this is a bad idea, with nasty unintended consequences. Doing contortions to save $6,000.00 in probate fees can lead to $100,000.00 in litigation costs when a dispute breaks out later. It can also, at times, create unintended tax consequences for certain types of assets.

Lawyer Math

Probate fees are 0.7% of the value of estate. In Canada, there is no estate tax. Income taxes are typically in the 30%-45% range. As lawyers, math may not be our strong suit – that is why we are not accountants – but even with our limited adding skills we can detect a big difference between probate fees and income taxes.  Don’t try to save the small tax if it can cause issues on the big tax.

Even more expensive is if putting the asset into joint names causes a fight among the beneficiaries of the estate. It is entirely too frequent that the survivor on the bank account does not see Mom’s intentions the same way that the rest of the family does.  Horrible, expensive fights can result.

Moral of the Story

Do not do crazy things to avoid probate fees. In the grand scheme of things they are too small to worry about. Especially because those schemes lead to estate fights.

Notice: The articles on our website are provided for general information purposes only and should not be relied upon as legal advice or opinion. They reflect the current state of the law as at the date of posting on the website, and are subject to change without notice. If you require legal advice or opinion, we would be pleased to provide you with our assistance on any of the issues raised in these articles.

 
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