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The Benefits of Having a Will
I came across two situations recently, a client dying with a will and one without. With both clients from the same family, we were all sitting together while the lawyer explained the probate process of both situations. The results were very different and emphasized the benefit of having a will even without a lot of assets. Without a will, it was impossible to transfer car ownership to the spouse. The person with the will was able to deal with bank accounts, the car, and registered accounts with beneficiary designations without probate. I found this conversation very interesting and wanted to share this with you.
This is known as dying intestate. If this happens the government has in place an involuntary will and all financial assets in the sole name of the deceased are frozen. Without a will naming an executor, the family will need to apply to the courts to appoint an administrator to handle the estate. Once the administrator has been given a grant of representation, they can begin the probate process. Even once the administrator is assigned by the court, things are quite restrictive.
With a will, the deceased person can put in place what they would like to have happen when they pass away. It essentially gives them a voice beyond the grave and control of how their assets are distributed. It also assigns a guardian for children under 19 and appoints an executor to manage their estate. With proper planning, probate costs can be reduced, and the process can be expedited.
So, what is probate? Probate is a process used by the Supreme Court Registry of BC to validate a will. It provides reassurance to heirs, creditors, business associates, and all interested parties that their interests have been fairly considered and protected. Having said that, not all wills need to be probated. The triggers for probate are beyond the scope of this article. Suffice to say, if you can avoid probate, it can save your estate money and speed up the transfer of the estate assets.
After probate is completed, the executor of the estate is given a grant of probate. The cost of the probate process varies by province. In British Columbia, the probate fee is 1.4% of the net estate value, while Alberta has a fixed fee for various sizes of estates but peaks at a value of $525. A $1M estate in British Columbia would have a fee of $14k while in Alberta the same estate would be $525.
There are several assets that can go outside of probate including:
A will assigns an executor to manage the process of winding up the estate. Before applying for probate, the executor will need to locate the will, notify government agencies, obtain insurance policies, etc. Executor duties also include:
Learn more: BC Government Wills and Estates
In BC, the executor can charge as much as 5% of the net estate value as a fee to administer the estate, a fee which is taxable as income. The executor is also personally liable for any debts or obligations not met.
Once the will and notice of intended application is presented to the courts, a search is done to confirm it is the most current will in case a newer will has not been registered. A notice of the intended application is sent to the executor, each named beneficiary, and to each person who would inherit if there was no will, even if their name is not listed in the will. An interesting point to note, after a will has gone through probate, its contents become public knowledge.
So, what assets must go through probate? Any assets held in the deceased name only – this is important because of the 1.4% fee on probate in BC. Any assets held in joint tenancy, like real estate, or with a designated beneficiary, like TFSAs, RRSPs, or insurance policies, do not go through probate and are not charged probate fee. Mortgages and property held outside of BC are deducted from the gross estate value. It currently takes about three to six weeks to receive the grant of representation, but it can take anywhere from one month to two years to settle an estate.
I would like to encourage everyone to prepare a valid will stating their final wishes, but proper planning must also be done to minimize probate costs and to expedite the process. If you don’t have a will and have assets worth over $25k solely in your name, probate is almost always inevitable.
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