Executors: What You Need to Know about Probate

Probate[1]. What is it? When is it required? Why is it required? In this post, we’ll discuss probate and its role in the estate administration process.

What is it?
Merriam-Webster defines probate as “the action or process of proving before a competent judicial authority that … the last will and testament of a deceased person is genuine”.

More simply put, probate is a court grant that ratifies the appointment of the nominated executor and acknowledges under the court’s seal that the Will has been properly executed and proved before the court that it is the deceased’s ‘last Will’.

When is it required?
Not all estates require that the Will be probated. But there are a multitude of reasons why it would be requested. Although not a comprehensive list, here are a few of the instances where probate could be required:

  • Real property is solely owned or as tenants in common by the deceased.
  • A transfer agent requires probate to deal with shares held in a publicly traded company.
  • A financial institution requests probate in order to release funds held on deposit.
  • A testamentary trust is established under the Will.
  • There are beneficiaries under the age of majority.
  • The executor has pre-deceased or renounces and no alternate executor is named.

Why is it required?
Obtaining probate is a process that protects the executor in the event a newer Will is found. If probate is not obtained and the assets distributed and a newer Will is later discovered with a different distribution scheme, the executor could be liable.

Financial institutions establish policy for determining whether probate is required to release the funds held at their organization. It is often based on how the account is registered and the value of the asset. As with the executor, probate mitigates the financial institution’s risk when releasing funds.

Applying for Probate
Each province has prescribed forms that must be completed to exact standards with respect to details about the deceased and the beneficiaries. In most provinces an inventory of the deceased’s assets and liabilities establishing the value of the estate is required. The original Will accompanies the application to the court along with the required probate fee[2]. Once granted, probate legally authorizes the executor to proceed with administration of the estate.

The Myths
One myth surrounding probate is that probate fees are charged on the entire estate. Probate fees are only charged on assets that will be distributed through the Will. Assets that are considered non-probatable, and therefore not subject to probate fees, include life insurance policies, pension plans and registered plans where a beneficiary other than the estate has been designated.

Another myth surrounding probate fees is that they are excessively high. Admittedly, there are provinces that do have probate fees higher than others, but the fees range from 0.4% (even lower in Alberta) to around 1.7 %. On a $1,000,000 estate the highest probate fee payable in Canada would be approximately $17,000.

It is always prudent to reduce the probate fees the estate will pay through proper estate planning; however, there are times when the cost of avoiding probate may be higher than the probate fees incurred at the time the estate is administered. Discussing options with an estate professional should be done before implementing any strategies to reduce probate fees.

[1] Certificate of Appointment of Estate Trustee (Ontario)
[2] Estate administration tax (Ontario)
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