How To Minimize Probate Fees and Taxes Upon Death

Wednesday, 21 October 2015 18:19 Written by  Published in Money Read 1237 times
When someone passes away, their estate is subject to a process known as probate, and you may have heard this phrase, “The will has to go through Probate” before the assets in someone’s estate can be distributed to beneficiaries. 

What is probate? Probate is a legal process that confirms an executor’s authority to distribute assets of a deceased’s person’s estate, and an estate is in simple terms, whatever they owned including real estate, bank accounts and personal effects. There are some assets that are excluded from probate including Canada Pension Plan (CPP) death benefits, jointly owned assets with a right of survivorship RRSPs, RRIFs, TFSAs with a named beneficiary other than Estate, and insurance proceeds paid to a named beneficiary.

The Government of Ontario charges a probate fee which is a percentage of the entire estate, which means that probate is one of the factors that will reduce the amount of money that beneficiaries receive (taxes payable upon death will also reduce the net value of the estate to be distributed to beneficiaries).

What does it mean for you and I? It means that we should be arranging our affairs in such a manner that will allow us to legally minimize probate fees and taxes upon death so that the money we left to our loved ones actually end up in their hands.

Insurance products by their very nature are designed to allow the owner to name a beneficiary and pass the proceeds directly to a named beneficiary, bypassing probate and taxes. GICs, non-registered investments and mutual funds that you, your parents or grandparents have in banks will become part of the estate and subject to probate fees.

GICs, and other investments sold by insurance companies are creditor protected, pass to a named beneficiary tax free and bypass probate. GICs and non-registered investments/accounts offered by chartered banks typically do not provide any creditor protection, and will become part of your estate when you pass away. This means that these funds will form part of your total estate upon death, and be subject to probate, and the probate fees are based on the total value of your estate, and not just the value of the money you have sitting in an account at the time of death.

If you could legally pay less taxes and fees and put more money in the hands of your loved ones why wouldn’t you? The difference between families that transfer wealth in a tax efficient manner and those who don’t , often lies in the quality of the estate planning. Unfortunately banks won’t advise you to hold some of your money in an insurance investment because they will lose business; however I have friends who are bankers who hold some of their investments in insurance products because they understand the effects probate fees can have on their families.

Act today and mitigate the effects that probate can have on your family’s financial fitness.

Last modified on Wednesday, 18 November 2015 12:32
Karl Marshall

Insurance and financial services professional with over 20 years experience.

I specialize in helping business owners and self employed professionals protect their business, families and income with the wonder of life, health, disability, critical illness, property and auto insurance, and investments.

I pride myself in helping my clients protect their assets and develop wealth, and most importantly; I love helping them protect the most important asset that is often overlooked - Themselves.

Many business owners tend to overlook that they are in fact the heart and soul of their business, or in many cases, they are the business, and if anything happens to them, their business and families can be devastated financially.

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