If you type “how to avoid probate fees” into Google’s search bar, you’ll find countless links to newspaper articles, blogs and bulletins on tips for avoiding probate fees, or what are now referred to as “estate administration taxes” in Ontario’s legislation. Unfortunately, some of the unintended consequences of taking steps to avoid probate fees are not as widely discussed.
Probate fees in Ontario total approximately 1.5% of the value of one’s estate. How your assets are held at your death (ie. as tenants in common or as joint tenants), and whether you have named beneficiaries on your life insurance policies, registered plans, etc, will determine what is included in your estate for the purposes of calculating probate fees.
To keep assets “outside” of one’s estate and away from probate fees, too often individuals place assets into joint names without considering all of the potential consequences of this.
For example, if a parent transfers an asset into joint names with their adult child, the asset may not stay outside of the parent’s estate as intended if that parent’s intention to gift the asset to their child on their death is not made clear.
Additionally, by adding one’s child onto a bank account as a joint holder or on title for a house as a joint owner, among other potentially negative consequences, those assets could be exposed to spousal claims by the child’s separated spouse or to creditors’ claims should the child encounter financial difficulty in the future.
It is therefore very important that you consult a lawyer who provides estate planning services to ensure any steps taken to avoid probate fees do not result in unintended consequences.