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Probate Fees - Myth & Reality
In order to transfer one's assets upon death, it is often necessary to have the deceased's will authenticated by the courts. This process was formally known as "probating" the will and the attendant fees were referred to as "probate fees". Probate fees are calculated as $5 per $1,000 on the first $50,000 and $15 per $1,000 on amounts in excess of $50,000. For example, the fees on a $500,000 estate would amount to $7,000. In 1992, the Province of Ontario significantly increased probate fees and thus many estate advisors have given clients advice as to how these fees might be avoided. One of the most common ways to avoid probate fees is to place assets in joint name during your lifetime. Upon death, jointly held property flows directly to the survivor and no probate fees arise. At first blush, joint ownership appears to meet the needs of many couples who want assets to pass to a surviving spouse with as little cost and red tape as possible. The principal downfall is there is no guarantee in the future that the surviving spouse will not fall prey to predator children, second spouses, or that he or she will maintain their mental competency. Difficulties can accelerate when parents, in a desire to avoid "probate fees", institute joint ownership of assets with their children. This situation can lead to horrific results when for instance a parent needs cash for future living expenses and a child will not consent to the disposition of a jointly-held asset such as a summer residence. Problems can also occur in the event of an adult child's bankruptcy or a marital breakdown. As well, the transfer to joint ownership of capital assets such as a family cottage or stock portfolio which have large unrealized capital gains, can trigger immediate taxation that would otherwise be deferred until either the sale of the assets or the death of a surviving spouse. The bottom line is the avoidance of probate fees should not be the major concern in Estate Planning. For those with a million-dollar estate, a $15,000 fee is a small price to pay to ensure $985,000 of your million goes where you want it to go! John D. Nichols is a corporate/commercial lawyer dealing with the full range of issues affecting small business, and a partner at the Howell Fleming Law Firm. |