When an affluent person dies, they want to be certain that their assets will pass on to their rightful heirs. For most of our clients, nothing matters to them as much as their family and loved ones. Our clients want to know that their beneficiaries will be taken care of and that the transition will be as smooth as possible. Probate can sometimes get in the way of that ideal.
Probate is the legal process of having your will declared valid and in its final form by the courts. This can be a very long process, especially for more complicated estates. It commonly takes 18 months to complete, and during probate limbo, your beneficiaries will not receive the assets you left them. Beyond the delay, it’s also useful to know that everything in your last will and testament will become public record. Therefore, any assets you’d prefer to leave off the public record should be left to its rightful heir in a different manner. Finally, probate can be expensive, so keeping your most valuable assets out of probate will save your estate substantial amounts of money.
Joint Ownership is one of the easiest ways to bypass probate. Because the asset is legally owned by you and another party, it automatically becomes the property of the survivor upon the death of one partner. Many spouses choose joint ownership for their homes and bank accounts. However, there are two major concerns with joint ownership. First, you must make sure that your account specifically has a survivor clause to ensure your joint partner will inherit your portion of the asset smoothly. Second, a joint ownership can leave you vulnerable. If you jointly own a bank account with one of your children for example, they could potentially withdraw every nickel from it. Similarly, if you and your spouse separate, they will have every legal claim to half of whatever is in your joint account even if you are the only person contributing to the money there.
Living Trusts are another tool that allow you to avoid probate. Unlike the assets in your will, what you place into a living trust does not become public record. This makes it an ideal tool for passing on assets without drawing a spotlight to them. There are two kinds of trusts. The one we’re focusing on today is a living trust which is created while you are still alive. It’s important to note that once an asset is placed into a trust, it’s held legally by a trustee for the benefit of a beneficiary. This is one of the most powerful aspects of a trust — your heir can benefit without owning the asset directly. This means you don’t have to worry about your child spending their entire inheritance, because they only have access to a small portion at a time. The assets in the trust are also no longer your legal property — which is why the trust wholly avoids probate. However, it also means that you should only place assets you’re willing to permanently part with into the trust.
When it comes to crafting your personalized estate plan, there are many tools available to you. Trusts can help you to place assets aside for your heirs now. They’ll benefit from what you’re giving to them, but they don’t have unchecked control over the asset. This can be useful for second or third spouses as well. You can continue to give your partner the lifestyle they’re accustomed to, but upon their death, the assets in the trust will safely land with your children of a previous marriage. Joint accounts allow instant use of an asset as it becomes the complete property of the survivor, and of course wills are immensely powerful in continuing your legacy.
The expert estate planners at MacMillan are here to help you design and implement a personalized estate plan that is crafted specifically for your unique family dynamic and individual priorities. We know all the tools accessible to Canadians to defer estate taxes, avoid an expensive and lengthy probate, and keep your legacy alive. Get started with your free consultation today.