The "Avoiding Probate at all Costs" Issue

One of the questions that I am asked on a regular basis is how to avoid probate. The concept of avoiding probate is raised in articles and blogs all over Canada and it is usually promoted as something we should all try to do. The reason given for avoiding probate is that probate fees can be high. The usual advice is to put property into joint names (usually with your children) to circumvent the probate process.

This is where people need to stop and consider the facts. In Alberta, we have the lowest probate court fees in the country. The highest your probate fee can be is $400, no matter how many millions of dollars are in your estate. If you are reading articles that say that probate fees will run into the tens of thousands of dollars, the article is probably written in Ontario or British Columbia, where probate fees are a percentage of the estate and are very high.

Having established that the number you are working to avoid is $400, you need to think about what you are risking by putting your property into joint names with your children. While having property in joint names between husband and wife is usually a good idea, I almost never advise putting it in joint names with your children.

Consider the case where Mr. and Mrs. Smith put their home in joint names with their son, Joe. They do this only to avoid probate at some future time. A few years later, Joe gets divorced from his wife. Legally, he is just as much an owner of the Smiths' home as they are. Now they risk losing their home and tens of thousands of dollars in equity because they tried to avoid paying a $400 court fee.

Unfortunately, quite a few people have already taken this step without legal advice. I rarely give a presentation without someone approaching me afterward to say they have already put their home in joint names with their children and asking whether it was a good idea. I do not mean to say there is never a good reason for putting assets in joint names with children, but in my opinion, if it is done solely to avoid probate, it may not be the best solution when balanced against the risk.

Before putting your assets - either real estate or investments - into joint names with your children, find out the facts and the risks by talking it over with an experienced estate planning lawyer. The whole idea behind estate planning is to set things up so that they run smoothly and give you peace of mind, and putting joint names on property may do just the opposite.