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Tuesday, August 2, 2011

Where there's a will: how to minimize probate fees

I'm not a fan of home-made estate planning, except when matters are extremely simple. The problem is that people hear a nugget of information and take action based on it, without really understanding the consequences of it or even whether the information really applies to them. I can't even tell you how many lawsuits are going on and how many families have been destroyed by what seemed like a simple action at the time. I'm talking about actions like putting a parent's home or account in joint names with the kids or naming a beneficiary of a registered plan such as an RRSP or RRIF.

I'm attaching an article by Tim Cestnick of the Globe and Mail. It summarizes a number of ways that people can reduce or eliminate probate fees. However, I suspect that the most important part of Mr. Cestnick's message - that you should understand what you're doing before you do it - will be lost. I say this based on many years of unwinding the home-made estate planning mistakes that well-meaning individuals have made. Click here to read the article.

I'd like to add my own message to this article. The information in the article is accurate and is important for people to know. But before anyone jumps in to reduce probate fees, find out (not by guessing or by asking your buddy at work whose aunt died a couple years ago, but from a lawyer) the following information:
- what would the probate fee on your estate actually be?
- is the probate fee worth the trouble of taking avoidance steps (e.g. in Alberta your fee can't be more than $400 no matter what you own)
- what would taking an avoidance step do to your over-all estate plan? e.g. could it disrupt your plan to treat your kids equally? Could it cause a dispute among the kids?
- what are the tax consequences of this action, both now at the time of the action and on your estate?
- what are the risks to you while you're alive? e.g. a house held jointly with a child is at risk if that child gets a divorce
- are there other ways of reducing probate that might be better suited for you?

Don't leave your family a mess to clean up by taking legal steps that you haven't thought all the way through. Talking to a lawyer for even an hour may protect your estate and your family.

5 comments:

  1. There is a little known but large dollar exemption for probating the house, called 'first dealings' - see this link for a well-written summary by an Ottawa lawyer. http://www.rosstalarico.com/law_news_3.html

    When I was handling my parents' estate the "real estate specialist" lawyer did not know of this exemption. If I hadn't discovered it and brought it to his attention we
    would have paid approx $5,000 in probate fees & costs unnecessarily.

    Thought it maybe of interest to your readers - thanks .

    ReplyDelete
  2. Alberta caps probate fees at $400.00! I should have moved to Alberta. I paid over $3,000.00 in Ontario (based on the market value of the estate) to probate my father's will 6 years after his death because my brother refused as dad's executor to do it thinking I would then be able to force the sale of the estate. Instead that only gave my brother more power than he already had. With hindsight I would have been better off to not probate & file with the courts to have him removed as executor. Hindsight is always 20/20.

    ReplyDelete
    Replies
    1. Alberta has raised its fees, which are now capped at $550. Still a lot better than $3,000.

      Lynne

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  3. Thanks Lynne. Alberta sure looks like it is the best province to be in. I still love Newfoundland best because it has people like you there. Ontario by far is the worst in every way!

    ReplyDelete
    Replies
    1. Aw, thanks. I love the people here, too. Very friendly, very neighbourly and helpful, and always up for a party :)

      Lynne

      Delete

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