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Learn about the process of probate so that you can make informed choices around estate planning. There are investment products available that may help to support you in creating a complete estate plan.
Note: the information contained in this article is not applicable in the province of Quebec. Quebec does not charge probate taxes, but there could be court filing fees to probate wills that are not notarized. For more information, consult with a lawyer or a notary.
Probate is the legal approval process to confirm:
If you don’t have a will at death (known as dying intestate), a court’s process to distribute your assets to your heirs becomes complicated.
At death, most wills go through probate. Why is there a process to prove that a will is valid? Probate exists to protect an estate from people who make illegitimate claims to that estate. Your estate is made up of the money, belongings, property, and debts you have at death. Assets held in insurance contracts and in registered accounts (e.g., an RRSP)* may not be part of your estate if you have designated a beneficiary or, when possible, a successor owner. This means that they don’t need to go through probate.
Term tips
An executor carries out the terms of your will and manages your assets after you die. It’s best for you to name your executor. If you haven’t done this before you die, the court appoints someone as your executor. An executor could be a family member, friend, or trusted professional, such as a lawyer or accountant.
A will is a legal document that details who you want to receive your money and belongings, and in what proportions, after you die. Those you name in your will are your heirs. A will can also specify how you want to care for minor children and other dependents.
How does probate work?
Your executor submits your will to probate court. The court will validate that the will is legitimate over any other documents or proposed wills. During this time, it’s possible that someone could challenge your will. For example, if they demonstrate that you created your will when you lacked mental ability. In a situation like this, the court may decide to recognize your previous will as the true will.
Once the probate court accepts your will, they decide if whom you named as executor is still appropriate to represent your interests and manage your estate. If they are, the executor can then carry out the terms of the will. This would include approaching any financial institutions to release your money and investments for distribution to your heirs. It would also include distributing your belongings and property.
What's good about probate?
Probate can be beneficial for small estates in some situations, particularly when a person has died intestate. In these situations, probate maps out a step-by-step process to distribute your estate appropriately.
Further, there are, unfortunately, people who attempt to benefit from an estate to which they don’t have an entitlement. This is fraudulent and illegal. Probate proves that a will is valid. It also proves that heirs named in the will are legally entitled to your money, belongings, and property.
What's bad? What's ugly?
In some cases, however, the process of probate is problematic.
1. The court makes an estate’s value public
This means your privacy is lost. Anyone can obtain the details of your estate, except, rarely, when a judge has ordered the file sealed. Privacy is an important concern. There is potential harm in making this information public. When the details of an estate are public knowledge, heirs could become targets for financial abuse.
When it comes to your estate’s privacy, ask yourself, “Do I want the general public to have access to the details of my estate?”
2. Fees
There are fees associated with probate. These can be expensive and erode the value of the estate for your heirs. They include probate fees and often executor, accounting, and legal fees. These vary by province and the size of the estate. Usually, probate fees are on a scale. Some provinces charge probate fees based a sliding percentage of the estate. Other provinces charge probate fees based on bands within estate value.
When it comes to preserving the value of your estate, ask yourself, “How can I reduce some of the fees?”
3. It can take months for money, belongings, and property to reach heirs
The process of settling an estate can average 12 to 18 months. Simple estates can be settled in less time; complicated estates could take longer.
When it comes to your heirs, it’s key to ask yourself, “Do I want to make them wait?”
There are solutions
There are solutions available to address the issues of privacy, fees, and duration of estate settlement. These include using insurance contracts where you can grow assets and name beneficiaries. There are two types of insurance contracts:
Life insurance contracts ensure that you provide for loved ones or your favourite charity after you die. You can also use them to pay estate taxes that you may owe. There are many types of life insurance contracts, such as term insurance, whole life insurance, and universal life insurance.
Insurance-based investments also allow you to provide for loved ones or charities after you die. In addition, they enable you to invest and grow your money with extra benefits. These may include guarantees and estate planning advantages. These types of contracts include insurance GICs (guaranteed interest contracts), payout annuities, and segregated funds (also called Guaranteed Investment Funds or GIFs).
With all these products, you can keep the amount of the death benefit and identity of your beneficiaries private. This is because, with the designation of beneficiaries, the death benefit flows directly to beneficiaries and not through your estate.
Having a will is a good idea. However, it may also be important to have other ways, like insurance contracts, to pass on assets after you die. They can help settle your estate efficiently and mitigate the downsides of probate.
*In the common law provinces, it’s possible to name a beneficiary on investments held in an RRSP and some other types of registered contracts, but it’s not mandatory. If there is no named beneficiary, these assets will form part of your estate.
This article is meant to provide general information only. Sun Life Global Investments does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting, and tax situation.
