Estate planning and probate

Please forward this error screen to sharedip-107180516. I am a Chartered Professional Accountant and a partner with a National Accounting Firm in Toronto. Planning to reduce or estate planning and probate probate taxes requires one to navigate a minefield of income tax rules, joint tenancy and right of survivorship issues and legal precedents.

Questions of legal versus beneficial ownership of property and evidence of intention often come into play. The scary thing is, that this type of planning is often done by the uninformed. When I started writing this blog months ago, my objective was to provide probate planning techniques. However, as I wrote and researched, I realized the legal concepts were extremely complex and beyond my area of expertise.

Consequently, this blog became more conceptual in nature than initially planned. After reading this blog, I hope it becomes clear to you that you need to consult a tax or estate lawyer when undertaking any significant probate planning. Two of the more common strategies to minimize probate fees are making gifts and transferring assets to joint tenancy. While these techniques may reduce or eliminate probate fees, they can create significant income tax and estate issues if not done properly.

If cash gifts are made during a person’s lifetime, they will reduce the value of his or her estate for probate purposes. 20,000, even though the shares were not sold and no money was received. If property is held as joint tenants with a right of survivorship, on its face, the property will pass automatically to the surviving joint owner and is therefore not subject to probate fees. I have seen many cases where parents put their adult children’s names on bank accounts and investment portfolio accounts.

The parents consider these accounts to now be exempt from probate, yet the parent continues to report the income earned on these investments in their own name for income tax purposes. This issue was addressed in Pecore v Pecore , a 2007 Supreme Court case where the court addressed these two potentially conflicting intentions. Legally, these two intentions are known as the presumption of a resulting trust and the presumption of advancement. This means that where a parent transfers assets into a joint account with one child, there must be evidence of the intention to make a gift to that specific child. The best summation of the various legal concepts discussed above that I have found is an article by a lawyer James Baird who attempts to explain these complexities. If done correctly and carefully, gifting, creating joint tenancy arrangements and separating legal from beneficial ownership can result in the reduction or elimination of probate fees.

However, probate planning can lead to unintended income tax and estate implications as discussed above that far outweigh the probate tax savings. The blogs posted on The Blunt Bean Counter provide information of a general nature. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs. Please note the blog post is time sensitive and subject to changes in legislation or law. I’d like to know how much income this amounts to for the Ontario provincial government.

Do they have do any work after the death? A picture of a big funeral would have complimented this post nicely. They definitely do not pay for your funeral and until you receive letters of probate, most banks will not let you you pay for anything other than the funeral and the probate fees. Regarding the issue of joint tenancy. My single parent is buying an income producing commercial property and putting me as a ‘director’. As long as my parent is alive they will get the income, but I was told this will help the tax implications upon death?

Anon-The term director is a corporate term, is the commercial property in a corporation or purchased personally? If corporate, the shares are part of probate unless you have a seperate will for those shares. If purchased personally, I am not sure what it means to be a director, I have never heard the term for probate. Just being made a joint tenant can be problematic as per the blog. I’m still not clear from the above explanation what the tax consequences are of the passage of a cottage through joint tenancy to a single child.

I believe this arrangement would successfully avoid inclusion of the cottage in probate, but would the parent’s estate or the child be taxed in any way? Assuming you have a proper legal agreement and the joint tenancy is structured so that the parent still beneficially owns the cottage, there is no income tax issue at that time the joint tennancy is established and there should be no probate upon the death of the parent. However, upon the death of the last surviving parent the cottage is deemed sold at its fair market value on the date of the parents death. Mark: Thank you for your time and effort on your highly informative blog. Let’s see if I’m on the right track wrt the family cottage, probate, taxes, and transfership. My grandmother and father jointly purchased the cottage in 1974. It qualified as her principal residence until her recent passing.