When is “Probate” Required?

Not every Will needs to be probated. In fact, in many situations, probate is not required.

By way of background, probate refers to the process of having a last will and testament affirmed and approved by the court as valid. The process results in the court issuing a certificate document to the estate trustee named in the will. The Certificate is called a “Certificate of Appointment of Estate Trustee with a Will.” Most people still refer to the process as “probate” because it is a lot easier to say, “applying for probate” than it is to say, “making an application to the court for a Certificate of Appointment of Estate Trustee with a Will.”

Of course, there is a tax that must be paid when a will is submitted to probate called the Estates Administration Tax which, again, is more commonly referred to as “probate tax.” The tax is calculated at the rate of 1.5% of the value of the estate in excess of $50,000.00.

If a will does not require probate, then there is no probate tax applicable to the estate.

When does a will need to be probated? While there are always exceptions and caveats to consider, in general terms probate is required (a) if the deceased person holds real property solely in her name (i.e, a home) or (b) has in excess of $50,000.00 held in bank or investment accounts.

In terms of “real property” like a home, whether probate is needed depends on how the deceased held title. If the home was held jointly, as is the case with many spouses, then title passes to the survivor with no need for probate, at least for the home. Rather, there is a separate application which lawyers such as myself prepare called a Survivorship Application which would be filed in order to remove the deceased person from title.

However, if title was held in the deceased’s name alone, then probate will most likely be required (I note “mostly likely” because there is an exemption for properties that were once registered in the old Land Registry System and have not been transacted upon since the new registration system was introduced in the 1980s).

When it comes to bank and investment accounts, in my experience, most major financial institutions in Canada use the benchmark of approximately $50,000.00 as the threshold for requiring probate when it comes to non-registered accounts.

In other words, if the deceased’s account balance in total is lower than $50,000.00, then the financial institution will likely pay the funds to the estate trustee named in a will (if there is no will, then no one has the authority to administer the estate, until a court appointment is made). In many cases, the financial institution will ask for an “indemnity” and/or a “release” document to be signed in exchange for not requiring probate which helps protect the bank if there is an issue down the road as a result of the will not having been probated.

When it comes to registered accounts such as an RRSPs, RIFs or TFSAs these accounts allow for the account holder to designate a beneficiary. The beneficiary then receives the funds in the account with no need for probate. The same is also the case for life insurance.

As with any legal matter, laws around probate can be complex and there are many issues that must be considered. Please feel free to contact me for further information about whether probate is required in any particular case.

Thanks for reading.

Jason

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