In most cases, probate is easy to avoid, and yet many people fail to do so. Below you will find a list of the four ways to avoid probate. What will work in your situation will depend on how your assets are titled and who you want to inherit your estate after you die.
GET RID OF ALL OF YOUR PROPERTY
The most extreme way to avoid the probate of your estate is to get rid of all of your property because without any property you will not have an estate that will need to be probated. Of course, this really isn't practical since you will need money to live on until your death, but in certain cases giving most of your assets away through the use of a special type of trust of which you can be a beneficiary may make sense. Using this type of trust combined with one or more of the other techniques described below for any assets that are not transferred into the trust will mean no probate assets, and therefore no probate estate.
USE JOINT OWNERSHIP WITH RIGHTS OF SURVIVORSHIP OR TENANCY BY THE ENTIRETY
Adding a joint owner to a bank account, investment account, or to the deed for real estate will also avoid probate, provided that it is clear that the account is owned as joint tenants with rights of survivorship and not as tenants in common. If you are married, then in certain provinces you and your spouse can own property with rights of survivorship in the form of tenancy by the entirety.
USE BENEFICIARY DESIGNATIONS
If you own life insurance or assets held in a retirement account such as an RRSP, or annuity, then you are already taking advantage of probate avoidance through the use of beneficiary designations. What you may not know is that most provinces allow you to designate beneficiaries for your bank accounts (this is referred to as a "payable on death"), and also for your non-retirement investment accounts (this is referred to as a "transfer on death”).
From an estate planning perspective, segregated funds are often seen as useful for minimizing potential probate. Since a segregated fund is an insurance product, where a beneficiary is named on the plan contract, the proceeds normally pass outside of the estate and probate is avoided. Upon your death, if you have named a beneficiary other than your estate, the proceeds are paid directly to the beneficiary bypassing probate. Probate can be a time consuming and expensive legal process as most provincial governments charge a costly probate fee.
USE A ALTER EGO TRUST
A Alter Ego Trust trust is a written agreement which covers three phases of your life:
- While you are alive and well
- If you become mentally incapacitated
- After you die
But signing the Alter Ego Trust agreement by itself is not enough to avoid the probate of your property after you die. Instead, once the trust agreement is signed, you will need to take your assets and title them in the name of your trust. Only after your Alter Ego trust has become the record owner of your assets–instead of you–will the assets avoid probate.
This is called funding the trust, and if you visualize your trust as a bucket, then you need to fill the bucket with your assets in order to ensure that the assets will avoid probate after you die. If any of your assets sit outside of the trust (bucket) at the time of your death, then the unfunded assets will need to be probated unless they have a beneficiary designation or are owned with rights of survivorship by someone who survives you.
