No one puts all their eggs in one basket these days, do they? Then why do it to your loved ones’ inheritances? When you make all your assets subject to probate, you lose potential tax savings that can increase the value of your Ontario estate.
Probate-proof Assets of Your Choice
Every single thing you own, from clothes to jewelery, antiques, investments and your home, can be part of your estate. That means, whether you have a personal will or not, they are subject to potential and very public probate court. If your privacy and wealth matter to you, probate proof your assets with these tips.
1. Sign a Joint Tenancy Agreement.
Real property you own, like a home or bare lot, goes through probate when you die, unless you have a joint tenancy agreement. The agreement gives your spouse the right of survivorship. They get the property title directly, without being probated, making it part of their estate. Your estate avoids probate fees or capital gains taxes that would be due if your estate sold the property and took the profits. Capital gains roll over to your spouse automatically.
2. Create a Trust.
If you want to live to see your heirs enjoy your money, open an inter vivos trust. Trusts are legal arrangements administered by a third party, the trustee. You can appoint anyone — a family member, friend or trust company — to manage your trust. You get to say how the money is administered and give away your wealth in your own lifetime. As the so-called “settlor”, you can attach any strings you want. Why not make sure it goes to a good cause, like letting the grandkids have the experience of a lifetime volunteering in Asia?
Flexible Trusts for Almost Any Asset
Trusts can be used for almost any asset you can think of. Mutual funds, real estate you own yourself, lakeside cottages, your land cruiser or real yacht can go into your trust. Kids not getting along? Your trust can set the rules for who gets to stay in the Blue Mountain condo at Easter and who pays for strata fees and housekeeping.
A Trust for Every Situation
Trusts work well for adult children struggling with a drinking problem or any addiction. Your trustee releases money to pay outstanding debts, fund rehab or prop up a bank account when needed. You have the assurance of knowing your life’s savings are going to assist a troubled family member.
Save Taxes With a Living Trust
A living trust saves your heirs money by avoiding probate taxes when you die. Since Ontario estates over $50,000 (post Jan. 1, 2020) pay estate administration tax, your astute financial planning could add up to a tidy bit of change. Your heirs pay only capital gains tax if your carefully chosen investments or real estate go up in value. Capital gains are due every 21 years or when the asset is sold.
3. Designate Alternate Beneficiaries.
What happens to your RRSP, RRIF or life insurance if your spouse dies before you? Naming your spouse as beneficiary means financial assets pass directly to them when you pass. Creating contingent beneficiaries transfers the assets to your children or others if your spouse dies first. A financial advisor can help you set up contingent beneficiaries and get a signed agreement on how they will manage the proceeds after you die.
4. Distribute Shares Through a Holding Company.
Having a private company has its own tax implications, but it does permit surviving directors to transfer your shares to your beneficiaries without going through probate. Before you decide to use a private company to probate proof your estate, talk to a tax lawyer or accountant for financial advice.
5. Keep Your Estate Small.
Your trustee will pay no estate taxes if your estate’s value was less than $1,000 and they applied for an estate certificate before Jan. 1, 2020 or less than $50,000 if they applied after that date.
6. Make Multiple Wills.
For your estate trustee’s convenience, make two wills. Include assets that require probate, such as real estate you own yourself and investments you want to leave to your estate, in your primary will. Put assets that have named beneficiaries, such as life insurance policies, TFSAs or RRSPs, in a secondary will. An Ontario probate court will calculate your estate administration taxes based on the primary will only.
7. Write in Survivorship Rights.
Beneficiaries who die shortly after you can trigger costly estate administration taxes — yours and theirs. When grieving spouses or family members die in quick succession, that creates cascading taxes as estates pass from heir to heir. Writing a survivorship clause into a will requires beneficiaries to survive you by at least 30 days before they inherit.
You can make things a whole lot easier for your beleaguered executor by probate proofing your assets today.
Get Advice on Probate in Ontario
Axess Law’s Ontario probate lawyers can advise you when a deceased’s assets have to be probated. Virtual video call appointments can be made by calling 1-877-522-9377 or in Greater Toronto 647-479-0118 or using our online booking form. Dial in to a remote video call 7 days a week, day or evening, at your convenience. In-person meetings can be arranged at our Ottawa, Toronto, Scarborough, Vaughan, Etobicoke, Mississauga Winston Churchill or Mississauga Heartland law offices.
Click here to learn more about Axess Law’s probate law services.
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