Letters probate is an order of the Court of King’s Bench that proves the authority of the executor named in a will to deal with the property of a deceased person.
In Saskatchewan, the probate fee is $7 on every $1,000 of value passing through an estate. For assets that fall outside of an estate, there are no probate fees.
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The following assets fall outside of an estate and therefore do not require probate:
- Land held in joint tenancy — The surviving joint tenant becomes the sole registered owner of the land by right of survivorship.
- Bank or investment accounts held in joint names.
- Life insurance policies with a designated beneficiary, other than the estate.
- Registered investments, such as a TFSA, RRSP or RRIF, with a designated beneficiary, other than the estate.
Clients will often come to our firm wishing to restructure how they hold their assets in order to avoid or mitigate probate fees. Many individuals also simply add their adult children to title to their assets without seeking any advice from their professional advisers.
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While placing assets into joint ownership with one or more adult children can avoid probate fees, a more nuanced cost-benefit analysis should be taking place before placing assets into joint ownership with an adult child:
- Depending on the type of asset and the value of the asset, placing it into joint ownership may fall within the new T3 annual trust reporting rules for bare trusts, meaning that you could be required to file additional information with Canada Revenue Agency each year.
- In relation to land, courts in Saskatchewan have said that placing land into joint ownership, even just for probate planning purposes, creates an irrevocable gift of the right of survivorship in favour of the person added to title. Therefore, if the relationship between the joint tenants breaks down, the beneficial owner cannot “take back” what they have given away without the agreement of the other joint tenant or a court order.
- Placing assets into joint ownership with an adult child may expose such asset to creditor claims of the adult child, including family property claims. In Saskatchewan, there is inconsistent family case law on how to treat assets that are in joint names for probate planning purposes. In some instances, the court has ascribed only nominal value to such assets to determine the aggregate value of shareable family property. In other instances, the court has ascribed up to 50 per cent of the value of the asset to the non-beneficial owner to determine the aggregate value of shareable family property.
- There is a level of loss of control of your assets if you place them into joint tenancy with an adult child. For example, if you place your home into joint tenancy with an adult child, and you subsequently wish to sell or mortgage your home, your adult child will need to sign off on that. If they refuse to sign, you will need to obtain a court order.
- Probate planning may increase the risk of estate litigation if the beneficial owner did not properly document their intentions in placing their assets into joint names with one or more adult children. For example, if you have two children and add one of them to title to your bank accounts, then, upon your death, the child on title may argue that you intended to gift those accounts to that child, whereas your other child may argue that you intended the child on title to hold the bank account in trust on behalf of the estate to be shared equally between the two children. In the absence of proof of your intention, the law presumes, in this instance, that you did not intend to make a gift to the child on title.
If you still wish to proceed with probate planning once you have considered the cost-benefit analysis, it is important to see your lawyer about documenting the nature of the arrangement with some sort of agency or bare trust agreement.
Among other things, such an agreement can set out that you did not dispose of any beneficial ownership of your assets during your lifetime and your intentions upon your death (for example, you intend to gift the asset to the child placed on title, or you intend that the child on title hold such asset on behalf of your estate to be distributed in accordance with your will).
In addition, it is important to seek advice from an accountant as to whether the planning will result in the need for additional tax filings with the Canada Revenue Agency.
Jessi Brockman is a lawyer with Stevenson Hood Thornton Beaubier LLP in Saskatoon and can be contacted at jbrockman@shtb-law.com. This article is provided for general informational purposes only and does not constitute legal or other professional advice.
