How to Avoid Real Estate Probate in Canada

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Probate is a legal process of transferring the property from a deceased person to his/her heirs. The subject property in a probate is owned by the deceased person or decedent alone and is not explicitly willed to any of his/her beneficiaries. Such a property cannot be transferred to any of the beneficiaries, even with a mutual consent of the heirs, instead the probate court appoints a lawyer to sell off the estate and the proceeds from the sale are then split among the legal heirs of the decedent.

Since the lawyer’s fees, probate court expenses, probate fees and taxes imposed can be expensive, people mostly plan their estate in a way that helps them avoid probate. Avoiding probate does not mean and under cover settlement between the beneficiaries, rather it means ensuring that the property items do not become part of probate estate. Follow the steps stated below to avoid your real estate assets from becoming a part of probate estate in Canada.

Name beneficiaries on your life insurance policies

The simplest way to avoid probate is to name your loved ones on your life insurance policies, since a life insurance is paid directly to the named beneficiary. The life insurance funds cannot become part of the probate property, and thus can never be subject to probate fee and related taxes. You can also consider naming secondary beneficiary for a life insurance policy, just in case the primary beneficiary dies before you.

Hold your assets in cash and/or bearer certificates

It is also recommended to keep your assets in the form of cash or bearer certificates, such as shares and stocks, since liquid assets are usually excluded from the probate estate. A bearer certificate or coupon is similar to an open cheque that can be easily redeemed by the person possessing it. This way you can avoid your assets from becoming part of probate property and reduce the amount of fees and taxes charged to it.

Add Pay on Death or Transfer on Death designation to your bank accounts

Adding a Pay on Death or Transfer on Death designation to the bank account allow the account holder to decide to whom the property will be transferred after his/her death. Since a POD or TOD account will be paid or transferred directly to the suggested beneficiary, it won’t be subject to probate.

Title your assets to a joint owner

It is recommended not to own an asset alone, instead share the title with your spouse or any other family member, your parents or kids. However, make sure your joint is a trustworthy person, since he/she can claim to the joint property.

Give gifts

You can also avoid probate in Canada by gifting your property to your loved ones. The gifted property would not be the part of probate estate, but it may or may not be liable to taxes depending upon its FMV (fair market value). If the FMV exceeds the cost of property, then the amount exceeding the actual cost will be taxable.

The Canadian Revenue Agency (“CRA”) defines FMV as “the highest price, expressed in dollars, that a property would bring in an open and unrestricted market, between a willing buyer and a willing seller who are both knowledgeable, informed, and prudent, and who are acting independently of each other.”

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