Getting Probate – Hull on Estate and Succession Planning #103
Listen to Getting Probate
This week on Hull on Estate and Succession Planning, Ian and Suzana discuss probate – what it is and when you need it.
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Getting Probate – Hull on Estate and Succession Planning Podcast #103
Suzana Popovic-Montag: Hi and welcome to Hull on Estate and Succession Planning. You’re listening to Episode 103 of our Podcast on Tuesday, March 11th, 2008.
Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by
Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada, from the offices of Hull Estate Mediation in Toronto, Ontario, Canada. Here are Ian and Suzana.
Ian Hull: Hi Suzana.
Suzana Popovic-Montag: Hi there Ian, how are you?
Ian Hull: Just terrific, thanks. How you doing?
Suzana Popovic-Montag: I’m well, thank you.
Ian Hull: So just as a reminder, of course, we have our call in number at 206-457-1985 and if you want to look at our blog, our daily blog, go to our webpage at www.hullandhull.com and our e-mail address at firstname.lastname@example.org. We always welcome feedback and look forward to hearing from anyone who has any comments or wants to engage us at that level.
Suzana Popovic-Montag: So Ian, at the end of our last podcast we were just, sort of, wrapping up some of the preliminary considerations that an estate trustee who comes to meet with a lawyer and the lawyer, him or herself, would consider before actually doing that magical document, that application for probate or a Certificate of Appointment of Estate Trustee. And I just thought maybe before we move into that second phase of this whole process, we might just do a quick recap in terms of the discussions we’ve had over the course of the last few podcasts.
Ian Hull: Well go ahead, I think you’re best suited to recap as we go along.
Suzana Popovic-Montag: Great Ian. We did start, of course, by discussing sort of the difference between an estate where there was a Will that was going to determine how it would ultimately be distributed to the beneficiaries of the estate, and situations where there was no Will. And as we looked into a little bit of the discussions and considerations that people would think about in terms of funeral arrangements for a deceased and we talked about the situation where there are certain remedies that are available to a surviving spouse and what those options would be in the circumstances. We then touched upon briefly some discussions on the custody of children and guardianship of a child’s property in circumstances where a parent has died and we also had an interesting discussion on beneficiaries of an estate and things that would arise during the course of an administration and how we would look for beneficiaries, how we would advise them of their rights and that was a really neat podcast.
You did a solo podcast at one point, I believe it was our 100th podcast, where you talked about valuation issues and that’s another thing that’s really important in the context of an estate administration. And if I recall correctly, our last podcast we talked about tax returns and considerations that executors and lawyers who are advising them should sort of keep in mind when they are dealing with these situations.
Ian Hull: Great, thanks very much. So now we’re at the point of getting probate. And I wanted to spend a couple of minutes on two fundamental points on this at this point in the process. One is probate itself. It is typically required by banks and investment institutions and third parties who want confirmation by the Court that this is indeed the last and valid Will of the deceased. So its – and we’ll talk about it throughout this series no doubt, when you need probate and when you don’t need probate. But for the purposes of our discussion today, let’s presume of course we need probate. An easy example would be if I had an investment account with a couple hundred thousand dollars in it, a bank or financial institution just isn’t going to release it typically without probate.
Suzana Popovic-Montag: And another common example is if there’s real estate. If there’s a house, or a cottage or something like that. In those situations, you’ll typically need probate. But I think you make a good point about the fact that you don’t always have to. And that’s something that we should keep in mind.
Ian Hull: At this point in the process, typically when you’re going to make this application, the person has died some weeks later, you’re starting to discuss this – it’s not something you move urgently on always. In most cases, you’re maybe even a month or so after the death. So things have settled a little bit and so you want to take a deep breath and I want to encourage my clients to look at the nature of the assets and decide if you need probate at all. And we’ve talked about in past podcasts the fact that you could have primary and secondary Wills so that’s a two Will option. And those two Will options, give me one Will for the assets that need probate, another Will for the assets that don’t need probate, are important tools and you want to make sure you’ve sat down and considered those options because while the probate fee is not insignificant, it’s still 1.5% of the assets of the estate, and anything you can avoid paying in tax is a good thing.
Suzana Popovic-Montag: That’s for sure.
Ian Hull: The other thing that probate triggers, it seems from our practice and yours and my practice is predominately dealing with mediation and litigation in estates, is the fact that the act of applying for probate is often the tipping point in terms of contentious proceedings. As I say, typically we’re at some time down the road, maybe a month or so or maybe more after the date of death. The parties have started to consider their positions and when you go to apply for probate, this is often the time where you have to fish or cut bait. Are you going to accept the Last Will and Testament being the document that’s being put forward at that time or are you going to challenge it? Are you going to take a run at it, so to speak? So it seems to me anyway, this is a really important turning point to sit back, consider your options, get advice, because the third component of this is, of course, if it isn’t contentious and you’re going to proceed with probate, now the clock is truly on in your fiduciary hat. I mean it’s probably on at law, and we won’t get into too much of that detailed analysis before you get probate, but it is certainly on, you’re a true fiduciary once you apply for probate. So you can’t let go easily and it’s an important turning point from even a non-contentious standpoint.
Suzana Popovic-Montag: Well, Ian, I think with that introduction, maybe we’ll look at some specific procedural requirements that actually arise when you’re trying to apply for a certificate, starting, of course, with deciding in what jurisdiction you’re going to actually file that application.
Ian Hull: And certainly that’s crucial because in a contentious environment, you typically have to commence your proceedings in the place where the deceased died. And obviously in a non-contentious, where you’re just applying for probate, you have to do it where the deceased died. And in our mobile world, it’s not an easy answer all the time. In Ontario, for example, you can look to Section 7 of the Estates Act to get some guidance. But what if you’re a situation where you have a person who lives predominately in Florida during the winter and then up in Canada, but lives at the cottage in the summer and then lives at a condominium in the off season, so to speak, and the rest of the year at Florida? There can be some discussions as to where you want to apply for probate. And some tricks of the trade because you may be able to get probate quicker in different jurisdictions. You just have to be careful. The Local Registrar will ultimately be the one who will decide where it should be brought and I find that it’s not worth getting too cute about where the deceased died, because the Local Registrars are too smart to let us, sort of, take advantage of that.
Suzana Popovic-Montag: And that’s especially the case when there’s a timing sensitivity, like if you want to sell, for instance, a piece of property that’s owned by the estate and you need that certificate quickly, you want to make sure that you’re sort of in the right jurisdiction from the get go, so that there isn’t unnecessary delay because, yes, you’re right, those Registrars are very, very bright.
Ian Hull: So now in terms of the application, we don’t want to go through too much detail, the Ontario forms are particular and across Canada each jurisdiction has their own particular forms. But the one important theme and we’ve applied for probate across Ontario, certainly in different provinces…the one clear theme is back to the Registrars, the Court is very careful about these documents and they literally have to be letter perfect. And if they aren’t, the Local Registrars send them back for corrections.
Suzana Popovic-Montag: Another thing that we definitely run across quite frequently is the fact that a bond is required if the deceased died without a Will or if the person who’s applying to be an estate trustee doesn’t reside in Ontario. Or the different situation, of course, is if you’ve got an applicant who’s a trust company, then they don’t need a bond, so even if they’re not named in a Will, per se.
Ian Hull: And that bonding requirement can be tremendously onerous because…a couple of things; one is, is that you’re putting your own personal assets at risk. Basically, the Court wants to know that if you abscond with the money as an executor, there’s something behind it, some security to make sure the beneficiaries ultimately get their money. And if you haven’t been a named trustee, the Court gets a little more nervous obviously. But bonding requirements are really onerous and the bonding companies, certainly across Canada, are getting very, very tight about when they will issue bonds. The premiums are very expensive and so a lot of the time we’re finding anyway in our practice that we have to turn to the trust industry to step in, in administrations of this nature. And one of the things you always hear is, “Oh my gosh, the trust companies are going to be too expensive.” When you get that answer from you clients, Suzana, what do you typically tell them?
Suzana Popovic-Montag: Well then you say to them, “Well what is your alternative?” and as you say, the bonding requirements are really difficult and as we know, certainly from the profession, that there’s just a few companies out there that will even do it and when they do, it is very expensive. And typically it tends to be less expensive than having a professional trustee in place.
Ian Hull: And the one great fallacy, too, is that the trust companies don’t charge anymore than anyone else. They can’t. There’s a certain limit to what they can charge. And because they’re in the business, what I have found is, is that I will typically go to the trust company, negotiate the fee before we agree to put them on as the estate trustee. So you get a competitive fee for their services. And in fact, it can often be more competitive than if you went to a local lawyer or accountant because they’ve got an infrastructure set up that is more efficient for them to run an administration than with some. So it’s worth looking into anyway. I mean, we’ve got some great local counsel and local chartered accountants who will do it in a very efficient way too. So it’s one of those situations where I just think, when you have a bonding requirement being thrown at you, it’s worth pushing back to your lawyer and saying, “Wait a minute. I mean, okay, I understand the Courts are going to insist on that. But what alternatives do I have and does the estate have and can we avoid this?” and those are just a couple of suggestions.
Suzana Popovic-Montag: Those are great thoughts Ian, thank you very much. I think that basically brings us to the end of this podcast. Thank you for joining me and I look forward to our next podcast.
You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.
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