Bypassing Probate

Posted 06 Jun 2014 by Rick Irwin, CFP, CLU

Probate is a court procedure for “proving a will”, essentially establishing that it is the deceased’s last will and confirming that the executor appointed in that will is entitled to take all steps necessary to administer the deceased’s estate.  Where a deceased has no will or the deceased’s last will fails to appoint an executor, the court appoints a person to administer the estate.

Probating a will can be a timely process, with many documents to file and many steps along the way. It can also be quite expensive. In Nova Scotia for example, probate fees are $920.07 for the first $100,000 of the value of the estate and $15.53 per thousand after that. Let’s assume an estate with a $400,000 investment portfolio and $350,000 worth of real estate (including the primary residence, which does count in the calculation of probate). Probate fees in Nova Scotia would be almost $11,000! Which is why so many wish to avoid incurring this final cost to their estate.

The easiest way to accomplish this is ensuring that all of the financial assets have named beneficiaries. If so, the assets bypass probate and flow directly to the named beneficiaries. This strategy works for insurance products, most Registered plans such as RRSPs, RRIFs and TFSAs.  However, it does not work for all assets, including non-insurance non-registered investments, vehicles, and real estate.  Often, use of beneficiary designations is usually only a partial solution, leaving some assets to pass into the estate where they are subject to probate. But simple steps can be taken, including naming a beneficiary, to ensure that as much as possible of your estate can flow directly to your loved ones without going through probate.

As with any strategy, avoiding probate can’t be the “tail that wags the dog” when it comes to investment and planning decisions...but it should be given due consideration.