Oct 4, 2016
Funeral costs, legal fees, and other administrative expenses are all estate costs that are unavoidable when you die. Probate fees, taxes, and investments are other fees that you may not have even considered.
Additionally, before the money and property you leave behind is passed on to your loved ones, your debt must be paid first. You should establish a plan in advance to help cover or reduce your estate costs that you know about and the ones you haven’t even considered.
Probate fees are one of the common costs incurred. Probate is the process that provides court certification of this fact. There can be a cost to this – and probate fees to settle your estate can be high depending on the province you live in. In Ontario, the fees (officially called an estate administration tax) equal almost 1.5% of your estate’s value.
Tax on Capital Gains makes it so that you’re deemed to dispose of all capital property at death. Your estate must cover the tax on any capital gains. Tax on tax-sheltered savings plans are when registered plans such as RRSPs and RRIFs can be transferred tax-free to your spouse’s plan.
There are a few ways that you can manage your estate costs, and choosing the right way to do so can help with the overall costs incurred.
Leave a valid will – If you die without a valid will, your estate gets settled according to the laws of your province, rather than according to your personal wishes.
Name beneficiaries for insurance and registered plans – When you buy life insurance or open an RRSP or other registered plan account, you can name a beneficiary to receive the money when you die, this way you bypass the estate process and pay it directly to the person
Jointly own property – Holding assets, such as a home or cottage with another person is another strategy for reducing probate fees. Joint assets pass automatically to the surviving joint owner and are generally not considered part of your estate and subject to probate fees.
Preplan and prepay your funeral – This helps remove a key expense that your family or estate must cover upon your death. When you prepay, the money goes into a trust account or insurance fund until your funeral.
Buy permanent life insurance – Life insurance proceeds can be paid to your estate to cover estate costs or left directly to a beneficiary to provide additional amounts to a particular person. The proceeds are always paid tax-free.
Connect with the trusted Niagara estate lawyers of Chown Cairns for more strategies on how to reduce your estates costs and to establish your will. Learn more about our Estates & Wills Practice Group below.