Probate costs, estate taxes and preserving your legacy

You may be aware that probate is not necessarily a legal requirement. But, avoiding the process can be costly. In most cases, financial institutions will not release moneys until the completion of probate. Real estate (with certain exceptions) can?t be transferred without having received a probate for a Will. If a Will that has not obtained probate is subsequently ruled invalid the Executor or any third party that erroneously paid out money or property can be held personally liable.

You can reduce probate costs and taxes by reducing the value of your estate through asset transfer strategies like these:

Assets held in joint ownership with the right of survivorship pass directly to the surviving owner(s) when a joint owner dies. The property is not considered part of the estate and is not subject to probate.

Distributing assets during your lifetime either directly or through a trust reduces the value of your estate. In addition to losing control over those assets, you can be hit with taxes for unrealized capital gains, though, so careful planning is definitely a must.

Distributing assets through certain types of RRSPs, RRIFs and segregated funds offered by insurance companies, company pension plans and life insurance policies keeps them out of your estate. You name the beneficiaries and the transfer is direct. However, if the RRSP or RRIF beneficiary is someone other than your spouse, your estate will need sufficient funds to pay the income taxes owing on your death.

Your financial advisor and lawyer can help ensure you structure your assets and estate to limit probate costs and taxes while enhancing the legacy you leave behind.

This column is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact your financial advisor.