Explaining Wills And Probate
In Ontario, it’s called a Certificate of Appointment of Estate Trustee. The Will is approved and the appointment of the executor is confirmed by the courts.
When Probate Is Required
It isn’t always necessary to have a Will formally approved by the court. It really depends on the assets in question. In a joint tenancy, for instance, you typically would not need probate because it would automatically pass to the survivor. For certain real estate in Ontario, you do need probate or you won’t be able to deal with that real estate. For shares in private companies, you don’t really need probate. Where there are beneficiaries named in a Registered Retirement Savings Plan (RRSP) or a Registered Retirement Income Fund, you won’t need probate. Where beneficiaries are named in life insurance, you won’t need to do it.
Some banks, depending on the amount of money at issue, may not require a formal probated Will. If the estate is less than $200,000 and everything is going to the spouse, they may not require probate. Because these rules are not legislated, they vary from bank to bank and even from branch to branch. For smaller estates, the banks may not require the Will to be formally probated, but if the value goes beyond their guidelines, they are going to need that Will probated or they are just not going to recognize it.
Even if a bank doesn’t require probate, they still may want the executors to sign a personal indemnification in case it turns out there was a problem. If an executor is not comfortable with giving that personal indemnification or guarantee, he or she may want to pay for the probate fees and have the Will probated.
Ontario Probate Tax
In Ontario, probate fees are the most expensive in Canada. It’s actually a tax in Ontario called the Estate Administration Tax. In Ontario, the tax is calculated as $5 per $1000 of the first $50,000 of the estate and $15 per 1000 for the value of an estate over $50,000. It works out to approximately 1½ percent; for an estate of a value of one million dollars, the probate fees would be $14,500 using that formula. A lot of people try to avoid probate, but sometimes it pays to have it done.
Benefits of Probate
One benefit of probate is that financial institutions that are holding bank accounts or bonds and stocks will release those assets to the executors for distribution. If some of the lands that are in the estate are registered in what’s called the Land Titles System, in most cases you are not going to be able to sell that property or deal with that property unless you get a copy of the probate certificate. If the land is in what’s called the Registry System, you may be able to deal with the real estate without probate. An exception to the requirement for probate in the Land Titles System is where the land was originally in the Registry System and was converted to the Land Titles System and it is the first dealing with the property since the conversion.
Another benefit is that, if the Will has been probated and you are acting as executor, the document shows to everyone that you are the authorized representative for distributing the funds of the estate. Why is this important? Let’s look at an example.
You are an executor administering an estate of two million dollars. After six months, you have distributed a million dollars. Then someone shows up and challenges the Will and claims that the Will you are administering is not really the Last Will and Testament or is not valid for some other reason. Because the Will was probated, you, as executor, have protection under the Trustee Act and have no personal liability. If you are dealing with an estate without probate and have distributed funds and then find out that the document isn’t valid, you could be personally responsible to pay that money back to the estate.
Probate also gives some protection to the beneficiaries. Under the Succession Law Reform Act, dependants can bring what’s called an Application for Dependant’s Support. The dependant can be a spouse, or a child (which includes grandchild,) or a sibling, or a parent, or anyone who was receiving support or to whom the deceased had a legal obligation to pay support at the time of death. The reason it’s important to have probate is the limitation period for that type of claim does not start to run until probate is obtained. Six months after probate is obtained, no one can bring a claim for support if they haven’t already done so. If the Will hasn’t been probated, that limitation period has not yet begun to run and, therefore, there is exposure if another beneficiary shows up or a dependant decides to make a claim. If probate is obtained, it starts the time clock on that limitation period.
Sometimes, too, going through the process of applying for probate will get people moving in the administration of the estate. This can help avoid delays in taking too long to administer the estate, which is another positive side effect.
If you, or someone you care about, is dealing with estate law issues in the Markham, Ontario Region, contact Charles B. Ticker for a consultation.