In recent years, probate planning has become a more recognized topic in estate planning discussions. This is due to the increases in probate fees in jurisdictions such as Ontario. In many provinces however, probate fees are essentially NIL. Even when considering provinces with ‘high probate fees’, the costs associated with probate planning may outweigh the fees incurred.
Family Law Claims
When considering adding a joint owner to one of your assets, care should be taken as jointly owned property with someone else (a child) could be exposed to family property claims if that person separates or divorces.
If the asset is transferred to joint title during the course of marriage (in some jurisdictions, during the course of a common-law relationship) or if it increases in value, the asset could be shareable in a division of family property.
In some jurisdictions, a family home (which could include a vacation property) could potentially see a claim against it even if acquired prior to the marriage or common-law relationship.
Some provincial laws allow for an individual to state within their will that amounts transferred to a beneficiary are not to be considered family property. Additionally, income or growth of the asset are not divisible.
If beneficiaries keep the inheritance separate from other family assets, it is possible for the inheritance to be preserved from a family property claim. A provision should be included within your will to transfer specific assets to beneficiaries and avoid division. This provision is not available in all provinces so a lawyer should be consulted in the drafting of your will to ensure it captures your wishes while meeting applicable laws in your jurisdiction.
If spouses or common-law partners enter into a domestic contract which states that if they were to separate, the property that they brought into the relationship will continue to be theirs, could be nullified in relation to a particular asset if it is transferred into joint ownership.
When a spouse or common-law partner is added to joint title, the law presumes that they intend to share the asset. However, if the parties have a domestic contract, adding a joint owner should be approached with caution. If a domestic contract does not exist, adding a spouse as a joint owner can still impact the division of property upon a marriage breakdown.
Some jurisdictions exempt property brought into the relationship or received via an inheritance from the division of property. This exempt status usually needs to be maintained by keeping these assets separate from family assets.
Adding a joint owner will likely result in that particular asset losing its exempt status. Common-law couples should be especially careful as not all jurisdictions require the division of property upon relationship breakdown and the addition of a common-law partner as joint owner could alter this.
As we can see from these case studies, efforts to avoid probate fees can have drastically negative tax, distribution and equalization consequences. Instead of completing probate planning in a silo, it is important to consider your entire estate when making decisions. This will allow you to plan accordingly to protect your assets, minimize tax and preserve your legacy.
By using this website, blog or podcast, users agree as follows:
The information, services and/or products are for general information only and any reliance on the information provided therein is done at your own risk. If you make tax, accounting, investing or legal decisions after accessing this website, blog or podcast, it is recommended that you consult a qualified professional first.
The views and opinions expressed are those of the author, seller, guests or publisher and do not necessarily reflect the views of the organizations or businesses that these individuals are associated with.
Although we make strong efforts to make sure my information is accurate, we cannot always guarantee that the information on this website, blog or podcast is always correct, complete or up-to-date.Posted: 1/16/23