Previous blogs explained what ‘probate’ is, how the estate administration tax (popularly called “probate fees”) are calculated and how spouses might be able to arrange their affairs to avoid probate on the death of the first to die.
As noted previously, avoiding probate from one generation to the next is much more problematic. Generally, I advise clients that avoiding probate between generations is nearly always a poor idea due to the problems that can be created. As I work exclusively in the area of wills and estates, I see many attempts to avoid probate that end up being more costly than the estate administration tax and, worse yet, cause other unexpected and often serious problems that the deceased did not anticipate.
For example, adding a child’s name to the title of a parent’s home means that the child is now required to sign if the parent decides to sell, re-finance, or otherwise deal with the property. In addition, under Canadian income tax law, each person or couple may have one principal residence which enjoys an exemption from capital gains tax. However, if a child is added to the title of the parent’s home and the child already owns a home of his or her own, the capital gains tax exemption may be compromised. And, if the child is subject to the claims of a creditor or an ex-spouse, the parent’s home could be available to settle the claim.
Continued in Part Four
