PROBATE COST DIFFERENCES - Major Variances by Jurisdiction
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Probate avoidance strategies are driven primarily by the desire to avoid the government / court imposed costs of probate, which vary greatly by jurisdiction and can be quite significant when the decedent is of considerable wealth. As such, when one assesses the probate costs that can arise when the estate of a high-wealth individual is probated, one can understand why people in certain jurisdictions pursue probate avoidance strategies (e.g., involving purposefully-drafted trusts), while high-wealth individuals in other jurisdictions are unconcerned about the costs of probate.
Ontario
Ontario imposes one of the highest probate costs of any province in Canada, with the province's estate administration tax on a Five Million Dollar estate is $74,250.00 and on a Fifty Million Dollar estate it would be $749,250.00.
Ontario's estate administration tax since January 1, 2020, is calculated on the basis of the first $50,000 of the estate being tax exempt, with the remaining estate value above $50,000 being subject to an effective tax rate of 1.5% (which is the equivalent of $15 for every $1,000 (or part thereof). The tax is only levied on the assets that form part of the deceased's estate and require a Certificate of Appointment of Estate Trustee (probate) to be transferred. Assets that commonly pass outside of the estate and are generally not subject to this tax include:
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Assets held in joint tenancy (e.g., real estate, bank accounts) that pass automatically to the surviving joint owner.
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Life insurance and registered funds (like RRSPs, RRIFs, TFSAs) that have a named beneficiary other than the estate.
British Columbia
British Columbia is another high probate cost jurisdiction, when one considers that the probate fee on a Five Million Dollar estate would be $69,650.00 and on a Fifty Million Dollar estate it would be $699,650.00.
British Columbia's probate fees are calculated on the basis of the first $25,000 of the estate being probate fee exempt, up to the next $25,000 being subject to an effective fee rate of 0.6% (which is the equivalent of $6 for every $1,000 (or part thereof)), and with the remaining estate value above $50,000 being subject to an effective tax rate of 1.4% (which is the equivalent of $14 for every $1,000 (or part thereof), together with a $200 court filing fee required for all estates over $25,000. Probate fees in British Columbia are based on the gross value of the estate as of the date of death, less any secured debts; with assets that often bypass probate (and therefore are excluded from this calculation) including (i) assets held in joint tenancy (e.g., a jointly held house), and (ii) life insurance policies, RRSPs, RRIFs, and TFSAs with a named beneficiary other than the estate.
United States of America
To provide some further perspective, we can look to the United States of America, which sees serious probate avoidance strategies being undertaken for high-wealth individuals, and with very good reason. The US federal government's federal estate tax is subject to an exemption amount of $13,990,000, such that only higher wealth individuals would be subject to the tax, which at a rate of 40% is considerable, given that a Fifty Million estate would be subject to federal estate taxes of approximately $14,439,800 (and even where the surviving spouse can port their entire exemption, the federal estate taxes would be approximately $8,753,800). Furthermore, in certain states there would be the potential for additional state estate or inheritence taxes, such that there is a very substantial tax bill if the estate is probated; hence the significance of pursuing legitimate probate-avoidance strategies.
Alberta
Alberta is the polar opposite of these other jurisdictions, with the court-imposed estate administration fees being a maximum of $525.00 on estate amounts over $250,000, such that a probated estate in the amount of Five Million Dollars would only incur an estate administration fee of $525.00 and a probated estate in the amount of Fifty Million Dollars would also only incur an estate administration fee of $525.00. As such there is no value, from a probate fee perspective, to avoid probate in Alberta [with our more detailed discussion as to why probate-avoidance is not recommended in Alberta].
As such, when you are looking to create a trust that legally facilitates your objective goals, contact our law firm today to schedule a confidential consultation at 403-400-4092 or via email at Chris@NeufeldLegal.com.
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