Many people do not find out about the hidden costs that come with the death of a loved one until it’s too late. There are taxes and fees associated with many aspects, from the funeral to the will itself.
What is a Probate?
Probate is a tax that is charged when a will is processed after someone dies. It is paid through the deceased’s estate instead of through the trustee. Through the probate process, the official executor of the will, or estate trustee, is appointed.
Most wills have to go through the probate process, and in many cases the executor of the will cannot begin to distribute any assets until the process is complete.
How to Minimize Probate Fees and Taxes
The rate for probate fees varies depending on province, but in Ontario it is 1.5 percent. It might not seem like much, but these costs can add up. For example, a $1 million home in Toronto with a $450,000 mortgage could lead to a probate fee of about $9,250.
There are some things you can do to lower the cost of your probate when you pass away. While this advice can help with your estate planning, it is essential to contact a lawyer to help guide you through this process.
If joint ownership of certain assets is shared, those assets will pass directly to one owner when the other dies through right of survivorship. Since these assets are immediately transferred, they do not go through the estate and the probate is not utilized.
When your assets are held in a trust for someone, they do not go through your estate when you die because they are dealt with through the terms of the trust. Since it is not going through the estate, you will be able to avoid probate fees.
Advanced Delivery of a Property Deed
A property owner is legally allowed to sign a deed for their land that will then be kept with a lawyer and registered after that owner passes away. The land will then be transferred to the designated recipient of the deed, which does not go through the estate’s probate.
Use More Than One Will
In Ontario, you are allowed to create more than one will. The most common way this is done is by creating one will for profitable assets and another for non-profitable assets. Only the will that contains the profitable assets will have to undergo the probate process. You will need to use an estate lawyer to help you draft these wills, as you must be careful to ensure that one will does not revoke the other.
Talk to an Estate Planning Lawyer
Working with an estate planning lawyer is essential to ensure that you have everything in place before you pass away. It’s never too early to clear up your assets, as accidents happen and preparation is the best way to avoid surprises. Talk to a member of our estate planning team and determine ways to reduce probate fees and taxes today.
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