Saving the cost of probate fees

How to Minimize Probate and Estate Transfer Costs in Your Estate Plan

By Jay Chauhan*

If you’re looking to minimize the costs associated with probate, legal fees, and accounting expenses in your estate plan, there are effective strategies available that can help you pass assets to beneficiaries efficiently from one generation to the next. This guide outlines steps you can take to streamline the process, helping your heirs avoid substantial costs and delays.

1. Prepare a Will with an Executor and Named Beneficiaries

The first step in reducing probate costs is preparing a clear and legally valid will. Ensure your will is witnessed by two people and appoints an executor, who will be responsible for distributing assets according to your wishes. This executor should ideally have a clear understanding of their role and the responsibilities involved and should be capable of carrying out his role as an executor. Furthermore, specifying beneficiaries in the will with names minimizes ambiguity and potential conflicts, making it easier for financial institutions to transfer assets without needing court-ordered probate.

2. Secure Bank Agreements for Probate-Free Transfers

Many banks require probate to release funds from the deceased's accounts, but it’s possible to secure agreements or convince the bank to let you transfer assets without probate. I recently succeeded in obtaining the consent of three banks to allow such transfers. You’ll need a well-drafted will, a designated executor, and named beneficiaries to convince the banks that they will not have any issues to deal with later. If successful, this approach can save substantial probate-related costs.

3. Prepare Executor and Beneficiaries for a Smooth Transfer

To avoid probate and further streamline the process, involve both the executor and beneficiaries in estate planning discussions (with the testator's consent). Prepare a release form that the beneficiaries can sign to acknowledge their understanding and acceptance of the estate's division, costs of funeral and other expenses, and final transfer of assets. ?

4. Consider Joint Ownership for Real Estate

For real estate assets, one effective strategy to avoid probate fees is to create joint ownership with rights of survivorship. By setting up joint ownership between the surviving parent and their children, the property can automatically transfer to the children with right of survivorship upon the parent’s passing, bypassing probate process entirely. However, there are considerations to ensure this arrangement serves the parent’s best interests. To prevent the children from controlling the property while the parent is still alive, it’s advisable to set up a trust. Trust can include all the concerns of the parent and require the children to subordinate their decisions to the wishes of the surviving parent.

5. Establish a Trust to Protect Parental Rights

When implementing joint ownership, a trust can spell out the parent’s right to continue living in and managing the property without interference from the children. A trust document, in this case, would clarify that the parent retains full control over the property and can use or dispose of it as he or she wishes during their lifetime. This arrangement is particularly beneficial in families with strong intergenerational respect, as it ensures the elderly parent’s wishes are honored without risk of conflict.

6. Utilize Power of Attorney Provisions in Estate Planning

Including a power of attorney provision in your trust agreement allows the parent to retain authority over property decisions, even if they become incapacitated. This is a powerful tool that gives the parent peace of mind and secures the interests of the surviving parent. However, such estate planning must be carried out with great care and by an experienced lawyer well-versed in estate, real property, and trust law. The goal is to craft a solution that both honors the testator’s intentions and protects their rights effectively.

Key Considerations

Estate planning that avoids probate is ideal when you’re aiming to reduce costs, but it requires meticulous preparation and open communication and relationship between surviving parent and children. Here are a few final considerations:

• Choose experienced legal counsel: Given the complexities of estate, property, and trust law, it’s essential to work with a lawyer knowledgeable in these areas.
• Encourage clear communication among family members: This reduces the risk of misunderstandings and disagreements that could lead to litigation, which is costly and time-consuming. Misunderstanding between children or beneficiaries is more likely if the children have different levels of financial abilities.
• Document everything meticulously: Having well-prepared documentation clarifies expectations and can ease the transfer process for everyone involved.

With thoughtful planning, you can save your beneficiaries from unnecessary costs and complexities, creating a smoother, more cost-effective transfer of assets that respects your wishes and protects your family’s harmony.

*Jay Chauhan is a lawyer with 50 years of experience in Ontario and is also a lawyer in two other common law jurisdictions. He is also a retired Deputy Judge with 24 years of experience in Judicial decision making.