You’ve probably heard the term before. “Probate”. You might have a vague idea of what it involves, and you might have been told that you should do your best to avoid it. But what exactly is probate?
Probate is a term for the process by which the Estate Trustee (commonly known as the executor) of an estate submits the deceased’s Will to the Court (the Ontario Superior Court of Justice). The Court reviews the Will and the supporting material submitted with the application, and if it is satisfied that the Will meets all requirements, the Court will issue a Certificate of Appointment of Estate Trustee (‘probate’) to the Estate Trustee.
As part of the Application for the Certificate of Appointment, the Estate Trustee must notify all the beneficiaries of the estate. Beneficiaries who are entitled to a share of the residue of the estate must be provided with a copy of the Will and any Codicils. Beneficiaries who are entitled to a specific gift (e.g., a specific amount of money or a personal item) may be provided with an excerpt from the Will or Codicil that relates to their gift.
The Estate Trustee must also pay Estate Administration Tax (commonly known as ‘probate tax’) when they submit their Application. Estate Administration Tax is calculated as $250 for the first $50,000 of the value of the estate, and $15 for each $1,000 above $50,000. Estate Administration Tax is not payable on assets that pass outside of the estate (for example, assets that are owned jointly with a right of survivorship, or assets that have a named beneficiary in the account). Estate Administration Tax is also not payable on assets that pass under a secondary, non-probated Will (e.g., personal effects, household contents, cars, artwork, and private corporation shares). Debts (except encumbrances on real property – for example, mortgages) cannot be deducted from the estate value for Estate Administration Tax purposes.
So why is probate required? Although the Estate Trustee’s authority is derived from the Will itself, not the Certificate of Appointment, probate is usually required because financial institutions and other parties insist on a Certificate of Appointment before they will transfer the deceased’s assets to the Estate Trustee. This is because the Certificate of Appointment provides assurances and protection to the institutions that they are dealing with the correct trustee.
Probate may not be required if all the deceased’s assets pass outside of the estate (because they are owned jointly or have named beneficiaries). Additionally, some financial institutions may be willing to release the deceased’s accounts if the value is below a certain threshold.
If you are the Estate Trustee named in a Will, you should speak with an estates lawyer to determine whether you need to apply for probate in order to deal with the deceased’s assets. If probate is required, you should retain a lawyer to prepare the application to ensure that it is completed correctly.
If you are making a Will, you should also speak with an estates lawyer to determine what steps can be taken to minimize the Estate Administration Tax that will be payable on your death.