What Assets Are Not Subject To Probate In BC?

The issue of probate can be confusing. When you are preparing your Will or thinking about your getting your estate plan in place, you will almost certainly have questions surrounding BC probate. Will a probate application be needed? How much are BC probate fees? Are there steps you can take to reduce probate fees or avoid probate fees altogether?

The good news is that an estate planning lawyer can answer these questions and provide you with effective strategies to protect your wealth—and your beneficiaries’ inheritance—via the estate planning process.

There’s often a reluctance to seek professional advice due to cost or uncertainty, which can lead to mistakes in estate planning and misunderstandings about which assets are subject to probate. With proper planning, you can take steps now to reduce or eliminate the need for probate after your death and simplify the estate administration process. This article will explain what probate is when it’s required, and what assets are not subject to probate in BC.

Probate Basics: What is probate?

In British Columbia, probate is a legal process started by applying to the Supreme Court. By this process, the court formally approves the Will as the valid Last Will and testament of the deceased and confirms the authority of the person named in the Will as executor.

Who applies for probate?

The executor named in the Will applies to the Supreme Court of British Columbia to obtain an estate grant (called a Grant of Probate or letters probate). That confirms the executor’s authority to take over the deceased’s assets and convert the ownership of those assets (e.g., real estate and bank accounts) from the deceased’s name to the name of the estate.

How much are probate fees?

If a probate application is necessary, BC probate fees are assessed as follows:

• There is no probate fee if the value of the estate does not exceed $25,000
• 0.6% on the value of estate assets between $25,000 and $50,000, and
• 1.4% on the value of estate assets exceeding $50,000.

(see the Probate Fee Act, [SBC 1999] CHAPTER 4, s. 2).

That works out to roughly $14,000 on each million dollars worth of estate assets. If you would like an estimate of what probate fees may be on your assets, see here for a probate fee calculator.

In general, the cost to obtain an estate grant typically ranges from $3,500 to $7,500 in legal fees, plus disbursements and taxes, which may add an additional $1,000 to $2,000. To start an application for a Grant of Probate, the court charges a $200 filing fee, plus $40 for each court-certified copy of an estate grant and Statement of Assets and Liabilities required.

When is Probate Required?

The type of assets you own and how you own them at the time of your death are two of the main factors that determine whether probate is required. Third parties such as financial institutions, the Land Title Office, ICBC, and the Canada Revenue Agency have strict rules in place to ensure that a deceased person’s property is not transferred contrary to the law.

A court-certified copy of the estate grant is recognized by these third parties and tells those third parties that the executor has the authority to act on behalf of the estate. Here is why proper planning is important: if only one of your assets requires probate, all estate assets dealt with in your Will are subject to probate fees at the rates discussed above. For that reason, it’s important to consider each asset and how it factors into your overall estate plan.

What if the value of your estate does not exceed $25,000? A probate application may still be required, depending on the type of assets you own at your death. For example, if you own a vehicle or bank account that must be transferred after your death, a probate application will likely be needed. However, when the value of the assets of the estate does not exceed $25,000, the estate grant is issued without the need to pay probate fees.

What Assets Are Not Subject to Probate In BC? Assets that pass “outside” your Will

Probate is not required for assets that pass outside of your estate. These are common examples of assets that pass outside of a Will on death.

1. Property Owned Jointly

Assets held in joint tenancy typically pass directly to the surviving joint owner without the need for probate and without paying probate fees. Real property (house, condo, cottage, etc.) can be owned by joint tenants. Non-registered bank accounts and vehicles can also be held in joint names.

Joint ownership can absolutely be used as a strategy to avoid probate fees. However, there are legal implications, tax implications (e.g., if a non-spouse is added to title to property), and potential risks of joint ownership (for example, the property is then subject to creditors of the other joint owner). It’s essential that you understand the consequences before deciding whether joint ownership is right for your estate plan.

2. Assets That have a Designated Beneficiary

Assets like life insurance, RRSPs, RRIFs, TFSAs, and employer pension plans with a named beneficiary usually bypass probate. When you designate beneficiaries in these types of assets, the asset goes to the person(s) named without forming part of your estate. For example, proceeds of life insurance policies are paid directly to the designated beneficiaries. Probate fees would only apply if the proceeds were payable to your estate, or if the named beneficiary dies before you and no alternate is named.

A key concern when using designations is to ensure that they align with your overall estate plan. There is the potential to inadvertently disinherit someone or disproportionately benefit someone. If your main assets are assets with a named beneficiary, there may not be much in your estate to be divided among beneficiaries named in your Will.

3. Property Owned in Trust

When you transfer assets into a trust during your lifetime, those assets are no longer owned by you directly, and thus are not estate assets. Such trust property is not subject to probate fees on your death. The property held in trust, such as real estate or a trust fund, are distributed in accordance with the terms of the trust deed or trust arrangement that you create.

Trusts are very commonly used as a strategy to avoid probate. However, there are other considerations that must be factored in when deciding whether a trust is recommended in your circumstances. There are costs associated with setting up and administering a trust. There can be a loss of control when property is transferred into a trust. And there may also be tax implications—though there are two types of trusts, called alter ego trusts and joint partner trusts that may be available to you to delay or avoid some of these consequences.

Gifts Given During your Lifetime

Assets that you give away during your lifetime—called “inter vivos” gifts—are not subject to probate tax on your death. To be valid, a gift should be properly documented so there is no question about whether you intend to give the property away.

If you are considering gifting assets during your lifetime, you must be aware of the risks and consequences. When you make a valid gift before your death, ownership of the asset is transferred to the recipient, which means you lose control over the asset. Capital gains and/or land transfer tax may be payable (for example, the principal residence tax exemption may not apply if you gift real estate to certain people).

Personal Effects and Household Property 

Some types of personal property and household items do not require probate to be passed to your beneficiaries, and generally speaking, do not attract probate tax. That being said, certain types of personal property such as jewelry, expensive art, and valuable heirlooms may require probate.

It is highly recommended that you speak to an estate planning lawyer about any sentimental or valuable personal property to ensure it is dealt with most effectively and efficiently. You’ll also want to consider providing specific instructions in your Will or in a Memorandum to direct your executor about the distribution of these items. That can ensure fairness and avoid potential conflicts among family members after your death.

Property Dealt with in a Second Will

In British Columbia, you can use multiple Wills to reduce or avoid probate fees. For example, shares in a privately held corporation may not require probate, but if you include those shares in your Will along with assets that do require probate, such as real property owned solely in your name or as a tenant-in-common with another owner, the full value of all those assets is subject to probate.

If you prepare multiple Wills—one that deals with assets that do require probate, and one that deals with assets such as a shares in a private company or a valuable piece of art—your executor will only need to bring a probate application in relation to the first Will. The shares or the expensive art passed in your second Will can be transferred to your chosen beneficiaries without the need for probate and without their value attracting probate tax.

Questions about how the BC probate process impacts your estate planning goals?

An experienced lawyer can assist you with your estate planning needs as efficiently as possible, regardless of the complexity or issues presented by your estate. With proper planning, it may be possible to arrange your affairs so that your estate can be processed without the need for a probate application.

That being said, probate fees may not be as burdensome as you think, and there are risks and considerations other than probate fees to be taken into account when deciding on the most efficient estate plan for you and your loved ones. There are legal, practical, and tax implications of transferring assets to avoid probate that you must understand before making any decisions.

For more information or to discuss questions concerning a probate, estate planning, or estate administration matter, reach out to Veronica Manski, Probate and Estate Administration Practice Leader at 604-416-4403 (Vancouver) or 236-420-6400 (Kelowna) or vmanski@onyxlaw.ca.