Do You Need Probate?
“An investment in knowledge always pays the best interest.”
― Benjamin Franklin
I have always said that an educated client is my best ally. Last week, I attended a number of seminars on the topic of death and taxes. This blog is kicking off my series on this unavoidable topic. Let’s first start with some definitions.
An executor is the person named in a will who will manage the deceased person’s estate.
Probate means asking a judge if the will is the true last will of the deceased. A probate application takes time and costs money, which reduces the inheritance available to the beneficiaries of the will. One of the jobs as executor is to determine whether a deceased’s assets do or do not require probate. This blog will highlight assets that do not require probate.
There are two types of assets that do not need probate: designated-beneficiary assets and joint with right of survivorship assets.
Examples of designated-beneficiary assets are life insurance, registered savings plans such as RRSPs, RRIFs, TFSAs, and employee pension plans. When you acquire one of these assets, you are always asked to name a beneficiary. You will not need to obtain probate for these assets as they pass outside of a will.
Joint with right of survivorship assets typically include bank accounts, term deposits, and the family home. Many people have joint assets, not just married couples. It could be a widowed parent with a grown child helping with the banking needs of the parent. Each owner of a joint with right of survivorship asset owns 100% of the asset simultaneously. When one joint owner dies, the other already owns the whole asset, and probate is not needed for this asset as it also passes outside of a will.
There is another type of joint ownership called tenancy in common. A tenant in common owns a specific share of an asset, for example, 50%. When one tenant in common dies, that 50% share goes to the beneficiaries in his or her will, which may require probate. This is not the same as the asset passing outside of a will with right of survivorship to the joint owner. The important thing as executor is to confirm the type of joint ownership when you find a jointly owned asset.
Notice to Reader
Dean Constand CPA publishes this blog for information purposes only. Feel free to share with colleagues and friends. Although the material has been carefully prepared, it is not a substitute for professional advice.