When it comes to estate planning, minimizing taxes payable by an estate is an overriding concern, which includes usual expenses to plan for such as probate fees. Probate fees are calculated as follows:
- $5 for each $1,000 or part thereof of the first $50,000 of the value of the estate; and
- $15 for each $1,000 or part thereof by which the value of the estate exceeds $50,000.
There are several strategies to minimize probate fees payable and the decision to implement these strategies will largely depend on your particular circumstances. The topic of this blog, however, focuses on one strategy which is generally NOT recommended.
Real estate is often the largest asset in an estate and the inclusion of the value of real estate in probate fees often results in a noticeable increase in fees payable. Clients often ask if they simply add their child or children on title, would it result in minimizing probate fees payable by their estate. The usual response is “yes, but you will be creating a host of other problems”.
The following is a non-exhaustive list of why you should avoid adding your child or children on title to your primary residence:
- Your home is exposed to your child’s creditors. Since the property becomes an asset to your child, his or her creditors can make a claim against the property. Similarly, the house can be used as collateral against your child’s personal debts.
- If your child goes through a divorce or marital breakdown, the property is an asset which is “on the table” for the purposes of equalization payments to a spouse. Where an asset passes through a will for distribution, a provision is made to ensure that the asset is not to be treated as family property and that it is your intention that the gift be given directly to the named beneficiary solely.
- If you child does not own his or her first home, he or she will no longer be eligible for the first time homebuyer land transfer tax rebate (often this rebate exceeds the amount payable in probate fees).
- You will not have a say in how the house (or the proceeds of the sale of the house) gets distributed after your death. When property is owned jointly, there is a right of survivorship, which means that the joint owner becomes the absolute owner upon the death of the other owner (i.e.: the parent). Accordingly, the property does not pass through the parent’s will and does not form part of the assets to be distributed in accordance with the will. This may create friction where there is more than one child named in the will but only one child is on title.
For more information regarding probate fees and estate planning, please contact a Toronto real estate lawyer.