Smart strategies for probate planning

How to reduce probate fees

You can reduce probate fees with thoughtful planning. Here are some effective strategies:

Gifting assets: Giving assets to family members before death can lower the estate’s value. However, gifts may trigger income tax or attribution rules, especially when given to spouses or minors.

Joint ownership: Holding property in Joint Tenancy With Right of Survivorship (JTWROS) allows assets to pass directly to the surviving owner, bypassing probate. This can work well for spouses but can be risky with others due to tax implications, creditor exposure, marital breakdown, and loss of control.

Inter-vivos trusts: Transferring assets to a trust during your lifetime can remove them from your estate. If you’re 65 or older, you can transfer assets to a trust for you and your spouse on a tax-deferred basis. Keep in mind that trusts pay tax at the highest rate and transfers may trigger attribution rules.

Life insurance: Naming a non-estate beneficiary on a life insurance policy keeps the proceeds out of the estate and away from probate fees. These funds are usually available quickly and are protected from creditors. In Quebec, beneficiary designations must be made in the Will.

Registered plans: RRSPs, RRIFs, and TFSAs can pass directly to named beneficiaries. In most jurisdictions, this avoids probate. In Quebec, beneficiary designations must be made in the Will.

Testamentary trusts: Leaving assets in a trust created by your Will may prevent probate fees from being charged, by transferring title of the assets to the trust upon your death.

Multiple Wills: Using separate Wills for different asset types may reduce probate fees. For example, a secondary Will can cover assets like private company shares or personal effects that don’t require probate. This strategy is common in Ontario, BC, and New Brunswick.

Consider specific investment products

There are certain financial product that have built in estate planning advantages. These include:

Segregated fund contracts: Offered only by insurance companies, these combine the growth potential of the markets with estate planning benefits. When a beneficiary is named in a segregated fund contract, the death benefit bypasses the estate and is paid directly to the beneficiary—avoiding probate fees and delays. Segregated funds can also offer potential creditor protection ^{footnote 55} and guarantees on death and maturity values, making them a valuable tool for estate preservation.

Annuities: Annuities can provide a steady income stream, for example during retirement. When structured with a named beneficiary, the remaining value at death can pass directly to that person. This avoids probate and ensures timely access to funds. Like segregated fund contracts, annuities may also offer creditor protection. ^{footnote 55}

A word about named beneficiaries

Whether for life insurance, segregated funds, annuities, or registered plans (RRSPs, RRIFs, TFSAs), naming a beneficiary ensures that the proceeds are excluded from the estate and not subject to probate. The money is typically easily accessible, offering both financial and emotional relief to loved ones during a difficult time.

Proceed with caution and reach out for help

While reducing probate fees is appealing, it’s important to weigh the benefits against potential downsides. Over-planning can deplete the estate, limit income-splitting opportunities, and reduce asset protection. Always consider the tax implications and consult a professional before making changes.

Probate planning is complex and varies by jurisdiction. This article is not intended to be a comprehensive review of all tax and estate laws. Speak with a legal or tax advisor to tailor a strategy that suits your estate-planning goals and protects your beneficiaries.

^{1Footnote 1 details}Aside from the Income Tax Act’s rules for deemed disposition at death.

²Footnote 2 details ​ The probate process does not apply in Manitoba or Quebec. 

³Footnote 3 details For some provinces and territories, different rates may apply to smaller estates (less than $50,000)

^{4Footnote 4 details} Although Quebec does not levy probate fees, Wills (other than notarial Wills) must be authenticated by a verification procedure by the Superior Court of Quebec. A nominal fee applies.

⁵ Footnote 5 details ​Creditor protection rules depend on legislation and vary by province. It cannot be guaranteed. Consult a legal advisor for your specific situation. 

Disclaimer

These comments are general in nature and should not be construed to be legal or tax advice, as each client’s situation is different. Please consult your own legal and tax advisor.

Please consult the appropriate policy contract for details on the terms, conditions, benefits, guarantees, exclusions, and limitations. The actual policy issued governs. Each policyholder’s financial circumstances are unique, and they must obtain and rely upon independent tax, accounting, legal and other advice concerning the structure of their insurance, as they deem appropriate for their particular circumstances. BMO Life Assurance Company does not provide any such advice to the policyholder or to the insurance advisor.

Insurer: BMO Life Assurance Company

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