Probate Tax - What it Is and How to Minimize it
In this post, we’ll be breaking down what Probate Tax is and how you can drive down the costs associated with it.
Probate is the process of approving your will and the Executor you appointed to carry out that will. The probate fee involves your financial assets, and is directly proportional to their value. If you own highly valuable real estate when you pass, for example, this fee could be a real burden on your children or spouse.
‘Your estate’ could be thought of as a sum of financial assets that you own. For example, you could have multiple houses and an RRSP all encompassed under one estate.
In many cases, you’ll have to go through the probate process and won’t have a choice.
Financial institutions will want to verify your will’s legitimacy before paying out, and will want to protect themselves from fraudulent people trying to get money that isn’t theirs.
There are some ways one can minimize costs associated with probate, however. If you name a beneficiary (someone who will receive your money) to your RRSP’s and other investments, money will flow ‘outside of your estate,’ avoiding probate.
According to this article on retirehappy.ca, retirees are encouraged to give away some money if they’re wealthy, either to charity or family members. “[The money] is out of your hands and into the hands of a person who will be able to put [it] to good use.” Good use for that money could include your child paying off their mortgage or student loans. In a way, you’re still using your money for your own family’s interest but avoiding tax. Again, this is a scenario where money is considered ‘outside of your estate,’ and will avoid probate.
As probate fees are proportional to an estate’s value, you could reduce them by setting up joint tenancy for your home. For example, if you and your spouse are joint tenants of a house, when you pass your spouse will become the sole owner of the home. As a result, the house will not be considered to be under your estate, and will avoid probate.
In British Columbia, there are no probate fees for estates under $25,000. For estates over that, you can look into online calculators like this to get an idea of what your fees could look like.
The probate process can be highly complex and stressful. A credible lawyer could take it off your plate and make it a convenient experience for you.
If you're interested in legal representation from a credible Downtown law firm, take a look at our website or give us a call at 604-674-7755.
Bijan Law is a general practice law firm in Downtown Vancouver. We can help you out whether you're entering a partnership for investment, starting or purchasing/selling a business, want to keep wealth within your family, immigrate to Canada, or resolve a dispute.