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How to Avoid Probate Tax in Ontario

Avoiding probate tax can save you a lot of time and money. Some techniques are easier than others, but a simple mistake can cause more problems. That is why many people are starting to use the services of an estate planning expert to avoid the fees, filing requirements and lengthy delays that are part of the probate process in Ontario. 

We all want to pass something on to our family and loved ones. After a long life of working and generating your retirement savings, the last thing you want is for the government to take a hefty portion of your hard-earned money in the form of probate fees. 

Let’s learn more about probate taxes, officially referred to by the government as estate administration tax: 

What is Probate?

Probate is a public court process whereby the value and contents of an individual’s estate is assessed for the purpose of calculating the amount of ‘estate tax’ that is owed to the Province before any of the estate can be shared with family and friends.  Unfortunately, the Probate process can take years to complete resulting in large legal fees and during which, the Province can ask for reassessment(s). 

You can use this probate calculator to get your estimated probate calculation right away before you get started. 

What is the best way to avoid probate?

There are many techniques and tips that can be put in place to avoid probate fees. Here are some tips from our estate planning experts:

1. Create Joint Ownership for Real Estate

A great way to keep your real estate free from probate taxes is to hold your property jointly. If the owner passes away, having joint ownership, in some cases, allows your property to be passed automatically to the property’s surviving joint owner without having to go through the probate process. 

It is important to note that you want to make sure you designate this ownership clearly and properly because any mistakes can cause you more problems in the long run. This is why many people seek advice from estate planning experts. 

2. Name beneficiaries to your Assets

This is a crucial point. Beneficiaries should be added to registered savings accounts like RRSPs,  TFSA’s and RRIF’s.  This allows for these accounts to bypass the estate and therefore bypass the need for probate.

The biggest thing to keep in mind is that probate taxes are calculated based on the size of your estate. By designating beneficiaries, you are simply minimizing your estate’s size, which also reduces your probate fees. 

3. Gift Assets

Giving away your assets before passing is another way to avoid probate fees. By gifting your assets, you can reduce your estate by a sizable amount. It is also a great way to contribute to your family’s growth and ensure they are taken care of while you are still alive to enjoy it.

You have worked long and hard for your savings, so it’s only fair they go to the ones you love. It also brings an emotional aspect to the table. You can share a moment with your loved ones, knowing that you have helped them with their future. Whether you are giving your son your beloved hockey card collection or setting your grandchild up for college, it is a memory they will never forget.

It is important to note that there are no taxes paid on cash donations for both you and the gift receiver.  

This being said, it is crucial that you seek legal advice while going through this process. Other taxes may arise, and this is where an expert in estate planning can lead you in the right direction. 

4. Ensure you have a Will (or Two?)

A will, on it’s own, does not always enable one to avoid all probate fees, but it is an important piece of the puzzle. Wills only speak to assets that form part of the estate.  Generally, these assets will require probate, which is a public process.

In some provinces, it is advisable to create a second will. One for ‘probatable’ assets, and one for ‘non-probatable assets.  This requires specialty training.  It is advisable to seek help from an estate planning expert to ensure there are no hidden surprises that could cost you (or your heirs) a lot of money down the road. 

Protect Your Estate From Probate Fees

These are just a few tips and tricks on how you can set yourself up to avoid probate fees! It may seem a little overwhelming, but we are here to help. 

Let assist you with your financial future! We can help you avoid the exhausting, expensive, and time-consuming probate process at little to no cost. Have your affairs settled quickly and privately. Our Initial consultations are always no charge.

Contact us today to speak with an expert!

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