As you grow older, your estate can become more complex. You own more property. You have more assets. Because of this, when you pass away your estate could incur higher probate costs. Probate fees are the financial charges levied by government to confirm the appointment of your estate executor or trustee and to prove your will is valid. Since these fees are paid out of your estate, they reduce the amount you can leave to the people you love and the charities that you value — charities such as The Ottawa Mission.
Careful planning with your professional advisors can help reduce the amount of probate fees your estate has to pay. Here are some steps you can take to pass more of your assets on to your beneficiaries.
Leave your life insurance policies, annuities, retirement funds such as RRSPs, RIFFs and pension benefits to a beneficiary that you name. When you do this, the assets will not fall into your estate and therefore will not be subject to probate fees. Your insurance company or financial institution can advise you and provide the necessary forms for you to complete.
When items for personal use are jointly owned — things like homes, cottages, bank accounts, GICs, mutual funds – these items will go directly to your survivor, not your estate, and thereby circumvent probate fees.
If you own a business, you can transfer it to a trust or create a separate will that leaves the business to a named individual, such as your spouse. For some assets, it may be necessary to set up a revocable trust. These procedures can also reduce probate fees, but you should seek a lawyer’s advice before proceeding.
Inter Vivos Trusts
Inter vivos trusts enable you to transfer ownership of an asset when you die, yet retain full use and control of the property while you are alive. Such trusts can be arranged through your financial advisor and only after careful consultation.
Immediate Charitable Gifts
Donating gifts of cash, securities, life insurance, gift annuities and charitable trusts during your lifetime instead of through your estate exempts those assets from probate. It also allows you to enjoy the immediate tax benefits of giving.
Power of Attorney
You can ensure your wishes are followed by giving someone you trust power of attorney over your financial affairs. Should you become ill or otherwise incapacitated, your power of attorney will act on your behalf.
These are proven tips that reduce probate fees. Again, discuss any of these options with your professional advisors. In this way, you can protect your survivors from unnecessary financial hardships and maximize your legacy intentions. And these are all good things to do.