Probate planning can have advantages if done properly: however, there are many risks that may outweigh the benefits in some cases. Probate fees, or estate administration tax rates, are fairly low in Canada with the top rate being 1.553% in Nova Scotia on amounts over $100,000. In Ontario the rate is 1.5% on amounts over $50,000. Losing control of assets, exposing them to claims of creditors, or triggering immediate income tax liabilities are some of the risks of doing probate planning. Visitors who are contemplating transfers of property for the purposes of probate planning are encouraged to seek legal advice from a lawyer focussing on Will and estate planning before proceeding even if the changes can ultimately be implemented by another professional such as changes to beneficiary designations or a change in title to real estate.
Not all probate planning strategies may work in all jurisdictions. For example, using multiple Wills in Nova Scotia does not work to reduce probate fees due to a statutory provision about how the value of the estate is calcuated for the purpose of determining the provincial estate administration tax (probate fee). Legal advice should be obtained for the applicable jurisdiction before proceeding to be sure the desired result can be achieved without unintended consequences.
It should be noted that some types of property require probate to be transferred such as real property held under certain land registration systems in some jurisdictions or corporate shares in others. There is no option in these cases so probate planning does not work will all types of property in all jurisdictions. In most cases probate is optional at the discretion of third parties such as financial institutions. However, as a general rule some types of property are more likley to require probate such as brokerage accounts and any type of bank account or investment account with a balance above $100,000. Discretion regarding these items may exist at the branch level so there often is no clear rule across all aspects of one company.
The emphasis in probate planning often focuses on diverting property from a deceased’s estate by providing for the distribution of the property using an instrument other than the deceased’s Will. Respectfully, it is still open for debate whether an item of property is outside a person’s estate just because it is not distributed under a Will. This is a complex legal argument that is outside the scope of these materials but is addressed elsewhere in legal reference material. The answer may not be the same in all jurisdictions across Canada.
The ability of persons acting under the authority of a power of attorney (regular, continuing or enduring) to engage in probate planning on behalf of the person who appointed them is limited if not completely prohibited as it can amount to making a testamentary disposition. Probate plannning does not benefit the grantor of a power of attorney. It benefits the beneficiaries of the grantor’s estate. In order for an attorney for property to engage in probate planning, express authority in the appointing document is likely required and may still be subject to applicable provincial laws.