Probate

What is the origin of the word “Probate”?

The root of the word is “Provar” which in Latin means to prove. Probate historically included a process where a Court needed to ascertain whether the Will is really the Will of the deceased. The Will needed to be “proved” to be authentic.

Probate has since taken on a wider meaning. It has become synonymous with estate administration after death. The estate of a person dying without a Will (dying “intestate”) is administered in Court, as well as the estate of a person dying with a Will (dying “testate”).

Why is a court in charge of estate administration after death?

The normal way that we transfer ownership of property that comes with a title is to sign the title over to someone else. An example is signing a transfer form to transfer title of your car to a purchaser. After a person dies, signing their name becomes a little difficult and so it becomes necessary for a Court to authorize another individual called a “Personal Representative” to sign transfers of titled property on behalf of the deceased.

Are there some kinds of property that do not need Court Estate Administration?

Many kinds. Here are some examples:

  1. Generally, real property which is held in joint tenancy with right of survivorship passes to the surviving joint tenant without probate, subject to a contrary intention at the time that the joint tenancy was established. There is a need to complete some paperwork, however;
  2. Insurance policies pass directly to a beneficiary, if one has been designated;
  3. RRSP’s pass directly to a beneficiary, if one has been designated;
  4. Annuities pass directly to a beneficiary, if one has been designated;
  5. Bank accounts held in ITF (“In Trust For”) accounts move to the designated beneficiary or to a replacement Trustee;
  6. Property in the name of a Trustee who has been instructed to convey the property from the person who set up the trust to the named beneficiaries of the trust.

  7. As a general rule, bank accounts held jointly pass to the survivor automatically.*
    *NOTE: This will depend upon the forms signed at the inception of the bank account, what type of contributions have been made by each of the account holders, who the account was joint with (spouse, child, friend),whether or not the account's status is challenged, etc.  If accounts are substantial you should talk to your lawyer about joint bank accounts.

Again, the above are subject to some exceptions. Speak to your Lawyer about them.

Do all estates need to go through probate?

No. First look to see if the estate contains probatable property. If it all passes by joint tenancy designation or beneficiary designation, there is generally no need for probate.

Second, if there are probatable assets, look at the amount. Although there is no longer an exemption for estates under $25,000.00, lower value assets can sometimes pass outside of probate. For example bank accounts can frequently be released if the bank is given an indemnity. 

What is the relationship of probate to estate taxes?

Henry VIII relied on probate to raise taxes to finance his armies. When land passed through probate, the estate paid a tax. Then the Church created the idea of a trust, which avoided probate and deprived the King of his tax revenues. Henry VIII went to Parliament and had them pass the “Rule Against Perpetuities” which effectively said that a trust can’t go on forever, so that its contents could be probated and taxed.

Today, there exists little relationship between probate and estate taxes. If you own it, it is counted toward computing your estate tax obligation, whether or not it has to be under a Court’s Estate Administration in order for title to pass to others. However, the person who is appointed by the Court to be the Personal Representative of the estate is required to file the estate tax return, if one is required. Further, the Personal Representative can become personally liable for the estate taxes, if he/she distributes the assets of the estate to beneficiaries, yet fails to pay all or a portion of the tax bill to the taxing authorities.

How long does probate take?

Let us assume that the beneficiaries of the estate are not fighting. Let us assume further that everybody knows what and where the assets are of the estate and they are comparatively simple. That estate will likely settle in 2 months.

Is a Personal Representative entitled to be compensated?

He/she is entitled by law to “reasonable” compensation of up to 5% of the gross value of the estate. Compensation cannot be taken until all residual beneficiaries consent. If they don’t, the Personal Representative must apply to the British Columbia Supreme Court to “pass” their account and thereby receive the Court’s approval.

Is it possible to contest a Will?

There are a few traditional grounds for contesting a Will:

  1. There was a defect in the way the Will was signed or witnessed. Examples include forgery, or the fact that the Will was witnessed by someone before the Testator signed the Will;
  2. The Testator lacked legal capacity to make a Will at the time the Will was signed;
  3. The Testator was the victim of undue influence of another person, which overcame the Testator’s true desire regarding the disposition of his own estate;

    Aside from the traditional grounds, there are other grounds based upon statutes:
     
  4. The Will fails to adequately provide for one or more children or spouse;
  5. The Will fails to make provision for the children of a prior marriage;
  6. The Will specifically disinherits present spouse.