To probate…… or not to probate? This is the real question
What exactly is probate? If you live in Ontario the term probate has been changed to “Certificate of Appointment of Estate Trustee” (I believe the government thought that this new term was less confusing…..)
A Certificate of Appointment of Estate Trustee (formally known as probate) is the formal legal appointment and acknowledgement that a person’s will is the last true testament and that the Executor is officially appointed to act as the Executor. Think of it as a blessing, the court has blessed the appointment and the document is stamped with a shiny gold seal.
The process of applying for this certificate can be quite lengthy….mostly due to hurdles put forward by the major banks. Part of the application process is to prepare an inventory listing of what someone held on the date of their death, which can require a listing from banks or investment institutions. However, this can be difficult as some banks and investment institutions make executors jump through hoops in order to obtain this information. The most common complaint that I hear from clients is that their bank will not give the listing to them without probate……obviously we can’t get probate until we get the asset listing….I’m sure that I will write a blog about this issue one day too.
Nonetheless, once all the information is obtained, the application is signed and witnessed by the lawyer and then taken to the Superior Court of Justice. It is then reviewed and if everything was provided correctly the Certificate is granted.
Why would someone want to go through the process of applying for this Certificate? Well, in some cases they have to. There might be any of the following assets in an estate that cannot be dealt with until the Certificate is granted. Disclaimer, this list is a sample of the items:
Bank Account with a large balance
Large Life Insurance policy payable to the estate
Various bank accounts with various institutions
There are cases in which an estate may not require the Certificate at all (please note legal advice should be obtained prior to determining this yourself)
Property listed as Joint Tenancy
Life Insurance with named beneficiaries
Joint bank accounts
Registered investments with named beneficiaries
Now you may be thinking why wouldn’t someone want to set up their estate to bypass this Certificate process? The answer is not that simple, by adding people to your accounts or property there is an entirely different can of worms being opened that may have unintended consequences. For instance if you have a large balance in your bank account (congratulations) and you add a friend/family member onto it so that it can by pass the Certificate process they now have access and the right to those funds too. Are they going through a nasty divorce? Are they trust worthy? Is it possible they might go bankrupt? If you have property and are thinking of adding on your child, have you considered the tax consequences being triggered in order to avoid this certificate?
As you can see, it is not that clear cut. There are benefits to going through the process and there are benefits to not having to. The bottom line is if you are not sure of what your estate plan looks like and might be thinking about switching things so that it avoids the “probate tax” ……speak with a professional first. It’s your legacy, let’s make sure that it doesn’t end up the victim of unintended consequences.