Probate Explained—Key Lessons and Mistakes to Avoid

Probate. What is it? Why should you care? This is interesting! I promise!

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Probate. Horrible word. Makes one think of death. Interestingly, many people don’t know what probate is. What’s its technical definition? Well, probate is derived from the Latin past participle “probatum,” meaning “having been proved.” In legal context, and for our purposes, probate refers to the process of proving the validity of a will and verifying the executor has the authority to act on behalf of the estate.

It’s not always required, but when it is, it is a crucial part of the estate settlement. So with probate, there’s a court-issued certificate confirming the will is valid and an official confirmation of the executor’s authority. We know that. Now, this doesn’t all happen magically on its own though. The executor has to apply to the courts by providing an original copy of the will, a death certificate, a list of assets and liabilities, a court form specific to their province, and of course, money.

There will be probate fees — more in a moment. Oh, and probate is a public process — many don’t like that loss of privacy. This process, as you can imagine, can all take a while. So naturally many look to minimize or avoid probate fees and hassles and privacy issues to whatever extent possible. How do they do that?

That’s for me to know and you to find out. Kidding, I’ll tell you right now, I’m not even sure why I said that. Five main ways. 1) They name beneficiaries directly with certain types of accounts and products — RRSPs, TFSAs, life insurance, for example. This asset then bypasses the estate and avoids probate.

2) They use Joint Ownership with Rights of Survivorship. 3) They use trusts. 4) Some provinces, multiple wills are seen. Oversimplifying here, but often one will covers assets that need to go through probate, and one will covers assets that don’t. And 5) Seeing a lot more of this, is gifting before death.

But here’s the thing: Wow, I’m seeing a lot of people screw this up. Especially in the provinces with higher probate fees, AKA estate administration fees, like Ontario, BC and Nova Scotia, people are so desperate to arrange their affairs to avoid the fees, that they’re creating, even bigger issues. I’m going to give you an example.

An unmarried parent dies and leaves their $600,000 RRSP to one of their adult children. Yes, the monies go directly to that child, and probate is avoided, but you know what’s not avoided? The huge tax the estate owes on the RRSP. Where’s it gonna come from? The other beneficiaries, maybe. Has this been properly planned for?

Often not. I’ll tell you something about estate planning. It’s not super tricky, but it’s tricky enough. Get expert help and listen to our upcoming podcasts. We have some of the top people in the country coming on to look at all this. Another thing, it’s crazy how some people are just slapping a family member’s name on an account or a deed

to try to avoid probate without thinking through all the ramifications. What about the fairness to other family members? For example, how’s all this gonna play out? Again, get help! By the way, in Quebec, they used the civil code, not common law. Notarized wills do not require probate. Sweet. By the way, I’m quite confident that the high fee provinces would bring in a lot more revenue by lowering their fees.

People would spend way less effort trying to avoid the fees, and thus the fee would be applied to a bigger estate and there would be fewer court battles and less family friction. You know, I really like all this estate planning stuff, interestingly, and people say, I’m not fun. What?