CostOfDying

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< Folk wisdom is often expressed in short, memorable sayings like this: Don't jump over a dollar to save a dime. And that's a good one to take note of \x96 especially when it comes to the potential cost of overeager attempts to save on probate fees. By focusing too closely on those costs, people run the risk of saving a few nickels and dimes on probate while paying way too much in income taxes.
< That's where a well-considered probate plan comes in \x96 one that not only seeks to limit probate fees, but also sets out the most efficient methods for limiting income taxes, as well. After all, the main objective is to leave the largest possible legacy to your beneficiaries.
< The first step is to determine if probate is a concern for your estate \x96 and to do that, you need to know what probate is and how it works.

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> Folk wisdom is often expressed in short, memorable sayings like this: Don't jump over a dollar to save a dime. And that's a good one to take note of -- especially when it comes to the potential cost of overeager attempts to save on probate fees. By focusing too closely on those costs, people run the risk of saving a few nickels and dimes on probate while paying way too much in income taxes.
> That's where a well-considered probate plan comes in -- one that not only seeks to limit probate fees, but also sets out the most efficient methods for limiting income taxes, as well. After all, the main objective is to leave the largest possible legacy to your beneficiaries.
> The first step is to determine if probate is a concern for your estate -- and to do that, you need to know what probate is and how it works.

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< You can reduce probate costs \x96 and more importantly, taxes \x96 by reducing the value of your estate through asset transfer strategies like these:

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

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> This page is part of the GayFinance series.


Probate costs, estate taxes and preserving your legacy

Folk wisdom is often expressed in short, memorable sayings like this: Don't jump over a dollar to save a dime. And that's a good one to take note of -- especially when it comes to the potential cost of overeager attempts to save on probate fees. By focusing too closely on those costs, people run the risk of saving a few nickels and dimes on probate while paying way too much in income taxes.

That's where a well-considered probate plan comes in -- one that not only seeks to limit probate fees, but also sets out the most efficient methods for limiting income taxes, as well. After all, the main objective is to leave the largest possible legacy to your beneficiaries.

The first step is to determine if probate is a concern for your estate -- and to do that, you need to know what probate is and how it works.

Probate is the process by which a Will is validated by a court. In most provinces probate fees are calculated on the fair market value of all the assets in your estate. In Ontario, for example (the province that charges the highest fee) probate fees or 'estate administration taxes' begin at 0.5% of the value of estates up to $50,000 and top out at 1.5% for estates in excess of $50,000. In British Columbia, the top rate is 1.4% over $50,000 and in most other provinces, the top rate is less than 1%. In Quebec, however, probate is not required for Wills prepared by a notary. For the other types of Wills, the fee for probate is not based on the assets of the estate but is a flat amount of less than $100 currently. In addition, you will normally have to cover the cost of your legal adviser for obtaining such probate.

Although the rules differ from province to province, probate fees generally apply to the entire value of your estate, with no deductions for debts, although some provinces allow a deduction for mortgages on real estate.

There are also other expenses that may be associated with probate including legal, accounting and Executor fees and these are typically based on the size of the estate and the amount of work involved.

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. Usually, 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 (by the discovery of a later Will, legal challenges, etc.) the Executor or any third party that erroneously paid out money or property can be held personally liable.

You can reduce probate costs -- and more importantly, 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. Same-Sex Spouses can opt to use this strategy.

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. This is a valuable strategy for same-sex partners - however careful planning is paramount to reduce the ultimate tax bill.

Each probate planning strategy needs to be assessed according to your personal and financial situation and the rules in your province of residence. That's why professional advice is vital. 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 page is part of the GayFinance series.