What is Probate?
Death and Taxes are the most certain things in our Life. When these two meet Probate happens.
Probate is an approval process that validates your will and confirms the appointment of your executor. If you don’t have a will or your executor can’t do the job, the courts have to appoint an administrator — and the costs will be similar to probate. (Make sure you have a Will )
Each province has its own rules and they’re too complex to outline here. In General, your executor will need to apply to your province’s probate court for approval of your will if you died in debt, with bank accounts or registered investments without a named beneficiary, or if you owned property that isn’t being directly passed to your spouse or common-law partner through joint ownership.
The Province Probate is the official body that grants probate approval (sometimes called “letters probate,” but a different name may apply in your province). If there is no will or executor, the court grants “letters of administration.”
When Executor needs Probate?
In case your executor contacts your bank, mutual fund company or pension plan provider, or the land title office with a non-probated will in hand, asking them to hand over your money or register a transfer of property title.
Those institutions will want proof that:
- you’ve died
- the will is valid and is the final version
- your executor is the person named in your will
- they won’t be sued if the will is contested
Let us consider this. Why would a bank risk being sued for handing out your money to the wrong person? Instead of taking a risk by assuming your non-probated will is valid, the bank can insist that it won’t release your money until it gets the legal protection that can only come from approval of your will by the provincial probate court. This is a huge advantage of the Probate.
Some people think that Probate Fee is Income Tax
Probate fees (which in Ontario are called Estate Administration Tax) and income tax are not the same thing. Depending on your province of residence, probate fees can be charged as a flat rate or as a percentage of your assets, not your income. And your estate may need to pay income tax or capital gains tax on assets that don’t even need to go through probate.
When is probate required?
Not all estates require probate, and a great many estates can be resolved quickly and informally without probate or any formal proceedings. Whether or not probate is required depends largely on: the nature of the assets in the estate, and whether the choice of executor, or actions of the executor, may be contested by one or more beneficiaries (inheritors) or other people.
With respect to assets, probate will likely be required when the estate includes any of: real estate (houses, condos, apartments, cottages) owned by the deceased in his or her name alone or as a tenant in common (not ‘in joint tenancy’); shares of a publicly-traded company (stocks listed on a stock market); or, funds or investments held at a financial institution (bank, trust company, brokerage) held solely in the name of the deceased and not ‘in joint tenancy’ with another person (note that sometime these institutions will not require probate if the amounts are nominal).
Life Insurance is an excellent tool which bye passed the Probate and your designated beneficiary get Lump Sum TAX FREE Money.
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