In 49+ years of law practice one of the most frequently asked will drafting questions I am asked is “how do I avoid probate fees”.
These fees are a tax levied against an estate by the Ontario government based on its value. The tax is calculated at 1.5% of the value of the assets as at the date of death less the first $50,000. As an example if the assets of an estate are $150,000 after subtracting $50,000 the taxable value is $100,000 times 1.5% or $1500.
If it is not necessary to apply to the estates court to probate a will no probate fees would be payable. This situation is rare since real property and investment assets are generally required to be included in the value of the estate for probate purposes. This is because an asset holder, for example a bank or the land registrar, will require evidence that the deceased had a will which appointed an estate trustee to administer the estate and that the court recognized the validity of the appointment of the estate trustee in the will.
If none of the assets require probate, such as where they were held on joint account with another person, it is possible to avoid probate and payment of probate fees. Since probate fees are only applicable and payable on application to the Estates court. This is the subject of another discussion however.
There are still two land registration systems in the province of Ontario, the “land registry system” and the “land titles system”. If at the time of the deceased’s death the original ownership was in the registry system at death or and was subsequently converted by the Ontario government into the land titles system, as has happened with most registered titles in the province of Ontario on occasion probate fees can be avoided. There are however certain requirements to be met before land transfer tax can be avoided.
This is called
FIRST DEALINGS AFTER CONVERSION
To deal with a property using the first dealings exemption, the following statements must be included in a supporting affidavit by the applicant, or by way of “Law Statements” from a real estate solicitor:
1. the property has been converted from Registry to the Land Titles System by the Ministry;
2. the Transaction is the first dealing after the conversion of the property;
3. the value of the estate must be specified;
4. the will is the last will and testament and a certificate of appointment of estate trustee was not applied for;
5. the will was executed when the testator was the age of majority and was not otherwise revoked; and
6. Proof of the deceased’s death.
It is important for a lawyer drafting wills to review the status of the title to land owned by the client to determine if the opportunity to avoid probate is available. If the client owns no other assets which will requires probate then it is probable that the land can be dealt with on a first dealings application to the land registrar and land transfer tax can be avoided.
However in the event there are other assets such as bank accounts in the deceased’s name at the time of death the asset holder, the bank, would probably require the will to be probated and therefore no first dealings would be available. That is why lawyers should search title to the client’s real property at the time the will is being drafted.
WHERE FIRST DEALINGS APPLIES THE SOLUTION TO THIS SITUATION IS TO HAVE TWO WILLS, A PRIMARY AND A SECONDARY WILL IN WHICH THE SECONDARY WILL DEALS WITH ASSETS WHICH DO NOT REQUIRE PROBATE INCLUDING THE LAND WHICH IS THE SUBJECT OF A “FIRST DEALINGS APPLICATION”. THIS WILL WOULD NOT REQUIRE PROBATE AND THEREFORE NO ESTATE ADMINISTRATION TAX SHOULD BE PAYABLE.
John Macaulay
This article is not intended to be relied upon as legal advice but only to give the reader an overview of the law in Ontario. You need to consult your legal representative to determine the best procedure in your particular circumstances.
