Probate- Why and How to Avoid Probate Fees

Previously we have discussed the probate process and probate fees, after reading on probate fees it is understandable that one wants to avoid probate fees as much as possible. Avoiding probate fees legally can be somewhat of a challenge and many factors need to be taken into account, such as ownership of all assets, tax implications as well as family relationships. Sometimes trying to avoid probate fees can end up costing you more. Please speak to qualified estate planner or estate lawyer about your personal situation. Having said that there are some common ways to avoid probate fees.

Why Avoid Probate?

There are many reasons why one would want to avoid probate:

1.      Time- The probate process can be a very lengthy process, the average probate process is about one year long with most lasting longer than a year; some even last decades. Your assets will be tied up in court proceedings and your family will not have access to it, this is a good motivation to avoid probate.

2.      Privacy- Probate process is not a very private matter; once probate file is opened documents will be available to the public so anyone who wants to can access them. By avoiding probate most people hope to keep some privacy.

3.      Cost- This is probably the biggest reason why you would want to avoid probate; probate fees can take up a large chunk out of your estate so why not avoid it if you can?

How to Avoid Probate

Living Trust

One way to avoid probate and probate fees is establishing a living trust. A trust involves generally three parties the Grantor, the trustee and the beneficiary. The Settlor is the person who creates the trust, trustee is the person who is responsible for the trust and beneficiary is the person who receives the benefits from the trust. It is very common in a living trust for all parties to be the same person i.e. Settlor = Trustee = Beneficiary. A living trust does not go through probate, the successor trustee you named when creating the trust will simply transfer the ownership to the beneficiaries you have named. This process does not involve courts or any probate fees and will be kept private. More on living trust.

Joint Ownership of Property

Another simple way to avoid probate is to have joint ownership of properties. Joint tenancy with right of survivorship in this type of ownership the property owned in joint tenancy automatically passes, without probate, to the surviving owner when one owner dies.

Gifts

Giving away property while you’re alive helps you avoid probate as well. You can simply gift the items to the beneficiaries while you are alive, if you do not own the properties at death it will not go through probate. Note that the gifts maybe subject to taxes.

Conclusion

Avoiding probate is understandable given the issues with the probate process and the cost of probate, these are a few common strategies used to accomplish this goal but may not be the perfect solutions for everyone. Each of the above mentioned strategies has its own drawbacks and costs and one should speak to a qualified estate planner before implementing any one of them.

Want More FREE Finance Tips?
Like what you just read and want to get more great content from Financial Highway? Just enter your email address below and you'll automatically get Financial Highway posts sent straight to your inbox.
We hate spam just as much as you

Comments

  1. says

    Great article. Succinct and to the point.

    With respect to joint tenants with rights of survivorship (JTWROS), one thing I would add is that anyone planning on making property JTWROS with someone other than their spouse should seek legal advice.

    Anyone registering property JTWROS should be aware that the property may be subject to the claims of creditors (or bankruptcy) and may be subject to the terms of a divorce.

    In addition, if the original owner did not claim a tax disposition, it is questionable whether probate is avoided. This exact scenario was heard by the Supreme Court of Canada http://canlii.org/en/ca/scc/doc/2007/2007scc18/2007scc18.html

    The court determined that unless a tax disposition was recorded on a joint account with someone other than a spouse, that the account will pass to the estate therefore be subject to probate.

  2. says

    Thanks for that Tax Guy! I will actually have a post on some potential issues with these strategies, but I was not fully aware of the tax rule regarding JTWROS

  3. says

    Ray,

    I think the problem with living trusts are that I rarely see one that is implemented correctly. They are often drafted but almost NEVER funded, so they essentially are a worthless.

    Just some thoughts.

  4. Mabel Verigin says

    Does a will have to be probated if the total assets are less than $150,000.00? I am the executrix of my brothers will whose only assets were RRSPs and some investments. There was no auto, no property and his benefiaries were clearly stated in his legal will.
    Mabel Verigin

  5. says

    Most financial institutions require probate if the account is above a certain value. Probate would not be required for the RRSPs if they have a direct named beneficiary.

  6. Woody Stock says

    If the only assets are bank accounts also in the name of the beneficiary, is any probate required or does the beneficiary just access the bank accounts?

  7. says

    Probate is not for everyone, but in most cases is not that bad. With some work probate can be avoided and this post offers both sides.

Trackbacks

  1. Festival of Frugality #199 – Damn, No Bonus Edition…

    I am hosting my first carnival. This is the Festival of Frugality #199 – Damn, No Bonus Edition. Thanks to everyone who submitted an accepted article.

    Since I’m not getting overtime, a raise of a bonus this year due to our good friend the recess…

  2. Carnival of Twenty-Something Finances – Amazing Anime Edition…

    Welcome to all my friends, fellow bloggers and lovers of personal finance information.  You are in for a treat today: a brand-spanking new edition of the Carnival of Twenty-Something Finances!  Whoo!  Since you’re in my neck of the woods now, I t…

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>