Do you really need to avoid probate? Is it even desirable?
While sometimes it can be advantageous to pass certain assets straight to your beneficiaries, probate is not necessarily the problem that some publications make it out to be.
Here is what you need to know about probate.
What is probate and what does it do?
Probate is the process through which the court validates a will. It verifies that the correct version of the will is being used and ensures that the will is valid and legal. It also authorizes the executor to begin administering the will.
Without probate, your executor has no proof that they are acting on the final, valid version of the will. This can create delays and problems with getting money and property released. Banks, title companies, and other institutions can end up on the wrong end of a lawsuit if they accept the provisions of a non-probated will and are wrong. Few institutions will risk it.
How much does probate cost?
Probate costs far less than most people fear. In most provinces, the calculations are based on the value of the estate. For example, in Alberta they’re capped at $525 for an estate of over $250,000. For an estate of $25,000 to $125,000 they’d only be $275.
It’s not usually the cost of probate that makes people eager to avoid it, but the time that it takes. Usually, though, that time is well worth taking.
Do you need to go through probate if there is a will?
Yes. There might be multiple versions of the will. The latest version of the will might be invalid because someone coerced the decedent into making changes. The whole point of probate is to validate the will.
If there is no valid will then the courts appoint an administrator and direct the assets to be distributed according to intestacy laws. In Alberta these laws are recorded in the Wills and Succession Act. The estate will go to spouses and children first, then can be distributed to other relatives according to a set legal schedule.
When estate planning it is a good idea to register a will so that it will be available when your heirs go looking.
What assets are not subject to probate?
While there are minor changes from province to province there are some assets which already automatically avoid the probate process as a matter of law. This includes jointly owned assets with a right of survivorship. If you want, for example, a house that you own to skip probate and to go straight to your children then you can make your children co-owners on the house with a right of survivorship. When you die, that house will just be their house.
Other assets not subject to probate include trusts with beneficiaries other than “estate,” insurance proceeds, and gifts made during your lifetime. In some provinces real estate outside of the province also will not be subject to probate.
One way to make sure your real property assets pass seamlessly to your heirs would be to place them in a revocable living trust. For example, you don’t want your house to pass through the probate process. You could place it in the trust. The trust owns the house, but the beneficiary of the trust gets to use it. While you’re alive, you remain the beneficiary of the trust, and so continue to use your house. When you die, the beneficiary becomes whomever you name, and they get the right to use the home as they see fit. The beneficiary can still sell the home as they see fit, though they may need the permission of whomever gets named as your trustee to do so. Much will depend on how you structure the trust.
We have helped some of our clients place the entirety of their assets into trusts that can bypass probate entirely. This is usually a good move when you only have a few heirs to worry about.
Why would you avoid probate?
Most people who worry about avoiding probate just want to speed up the amount of time it takes to get assets into the hands of their heirs. Privacy can be another reason, since the probate action enters the public record.
Will banks release money without probate?
Often they will not, which is a good reason to have the will probated. The exception would be for bank accounts that have designated a payable-on-death beneficiary, or in cases where you have a joint account. In cases where you have a joint account, the living account holder may still access the account.
Can you take possession of property without probate?
It depends. If you’re the co-owner of a property and the right of survivorship exists then you can continue to use your property. If you are not, you will likely have to go through the probate process before the title to your inherited property may be transferred to you.
You can also take possession of a property without probate if you are the named beneficiary of a trust that owns the property.
What happens if you co-owned a property with the decedent?
As long as you co-owned the property and the right of survivorship exists you should inherit the property without a hitch, with or without probate. This is one reason why estate planners direct their clients to name a co-owner, as it gives the heir access to the property right away.
Want to help your heirs inherit faster?
Most of our attorneys have decades of experience in this field, as well as backgrounds in real estate law and business law, both of which can be helpful with estate and succession planning.
The experienced estate planning attorneys at Merchant Law can help you set up your estate in a way that helps your heirs avoid the process for all or most of your assets. Call (780) 474-7777 to schedule an appointment today.